Currency Trading Systems – Making Money from the Longer Term Trends

January 12, 2010 · Posted in Forex Exchange · Comments Off 

Currency markets never sleep and several trillions dollars are traded everyday, making currencies the worlds biggest and most exciting investment market.

In recent years, mechanical currency trading systems, using technical analysis to predict trend movements have become increasingly popular as a way of locking into, and profiting from the longer term currency trends.

Making Money from the Longer Term Trends

Currency trading systems are ideal for making profits from longer-term currency trends, and they occur in all currencies.
The longer-term trends in FOREX markets reflect the health of the economy.

As economic cycles are relatively long and take years, so do the currency trends that reflect these cycles.

A good currency trading system can enable traders to lock into, and make profits from these longer-term trends.

When choosing currencies to trade, it is important to have good long-term trends, but just as important is liquidity, which enables traders to lock in profits and exit losing trades quickly.

Currencies that offer good trends and liquidity include:

The US Dollar

Swiss Franc

Euro

Japanese Yen

British Pound.

Currency trading systems remove emotions from trading, which is the major reason the majority of traders end up losing.

Removing the Emotion from Trading with Systems

There has been plenty of material written about using currency trading systems, and the works below provides informative reading for anyone thinking of using a currency trading system.

Traders should try to read the following authors:

Edwin Lefeurve, Jake Bernstein, Larry Williams, Ken Roberts, Van Tharpe and Jack Shwager whose books Market Wizards and The New Market Wizards interview some of the most successful traders of all time, including the turtles. The Turtles are group of traders who had no prior trading experience, but went on to earn hundreds of millions of dollars, using very simple mechanical trading systems.

Currency Trading Systems that Make Money

The developments in recent years in computer software, the growth of the Internet, and online trading, has seen currency trading systems become more popular than ever.

Software Packages such as Tradestation, Supercharts, Omni trader, and many more, allow traders to back test systems, using a variety of technical indicators that include:

Stochastics

Bollinger bands

RSI

moving averages

ADX

And many more.

The currency trading system picked can then be analyised, to see how it would have performed in the markets with commissions and slippage deducted.

Traders, who dont want to develop a currency trading system, can buy systems off the shelf from vendors.

How do you Choose a Successful Currency Trading System?

If you are buying a currency trading system, there are several things to consider before parting with your hard earned cash:

1. Are you interested in being a day trader, or a trader looking for longer-term trends? You need to pick a system that youre comfortable with and this is mostly down to personal preference. Some traders like the excitement of day trading others prefer a longer-term approach.

2. Do you want to have any input into the system, or do you want it to be totally mechanical?

3. Do you want to trade just one currency, or a basket of currencies? Using a currency trading system that trades just one currency can be more profitable but keep in mind, the converse is true, i.e losses and drawdowns can be larger.

4. When choosing a currency trading system you need to have confidence to trade with it, and follow the system through losing periods. To do this you should know the logic the system is based upon. If you understand the system and its logic, you will derive confidence and be more likely to follow it – in contrast to one where the logic is not revealed.

5. What are the average profits you can expect in relation to drawdowns? All currency trading systems will have periods of drawdown and losses. Generally the larger the profits the bigger the drawdowns tend to be over time – so pick a system that reflects your investment aims and risk tolerance.

6. When you are buying a currency trading system, check out the system sellers experience, track record, customer support, – and whether they have a real-time track record, or a hypothetical one.

A real time track records means the system has performed in the market and made money, i.e its proven. Trading systems that simply rely on hypothetical track records mean they have been back tested, – and with the benefit of hindsight we can all make money!

While hypothetical track records should be treated with a degree of caution, you can find out a lot about whether the system is likely to make money, by knowing the logic the system is based on.

When considering a hypothetical track record, look for one where the logic is revealed and not a black box system where you have no idea how to system works.

In conclusion, you can make your own currency trading system, or you can buy one from a vendor – when choosing one from a vendor make sure you do your homework, and remember – if it looks too good to be true, it probably is!

Currency trading systems can, and do make money, and the effort you put into finding the system that suits your personality, risk tolerance, and profit objectives, will be time well spent.

Author: Stephen Todd
Article Source: EzineArticles.com
Provided by: Guest blogger

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Best Forex Trading Methods – The Simple, Profitable Strategy the Real Pros Use and You Can Too!

October 25, 2009 · Posted in Currency Trading · Comments Off 

Here we will look at a Forex trading strategy the real pro’s use which most new traders ignore but don’t let that bother you most new traders lose. This is one of the best Forex trading methods for making big gains quickly so let’s take a look at it.

There is an obvious fact evident if you look at any Forex trading chart and it’s currencies trend for long periods of time but there is a fact which most traders never really consider and its the basis of this strategy and it’s this:

All major bullish currency trends start and continue there trends by breaking to new market highs. If you want to make the biggest profits with low risk then you simply base your Forex strategy on buying valid breakouts is this Obvious? Yes it is but most losing traders don’t do it and the reason why is they want to predict the exact low and catch the exact turn in the market. There is a problem with this though because prediction is just hoping and guessing and the trader who buys into support and hopes, soon get wiped out.

Forex markets cannot be predicted and the savvy trader knows, he needs to trade the odds on his side and the best way to do this is to buy breakouts. He may have missed the exact turn but what interests him is the odds are in his favor and a good breakout is likely to generate massive profits.

Not all breakouts obviously continue, so you need to be very selective and trade a level which has been tested numerous times in the past before the break. You should look for at least half a dozen and it’s really the bigger the number of tests, the higher the odds of a continuation once the break has taken place.

Breakout trading is very simple and can be done with just bar charts and a few confirming indicators, if you do this, you have one of the best Forex trading methods for making profits quickly and with low risk.

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Article Source:http://www.articlesbase.com/currency-trading-articles/best-forex-trading-methods-the-simple-profitable-strategy-the-real-pros-use-and-you-can-too-1375898.html

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