If you do a simple Google search for “Forex trading systems”, “trading strategies” or similar words you will realize that there are many, many people out there who claim to have “The Holy Grail of Forex trading systems” and that you can also get it in exchange for “just a few euros or dollars.
These systems promise to make thousands of pips a week and never lose. They will show you supposed results of that perfect system and your eyes will shine! They will make you think that you can make significant profits in a short time by paying a certain amount of money for the system.
But stop there! There are a few things you should know before pushing yourself to buy and give your credit card.
It is really very difficult for any of these systems to work, especially if they are a black box over which you have no control. The theory behind it may be good, but it is impossible to be successful in the long run using a system that you cannot configure or understand yourself. Unfortunately, there are no holy grails or great shortcuts in Forex.
The second truth is that instead of paying for one of these systems, you can choose to invest your time developing your own trading system and use the money that was going as capital for your account instead of paying for magic formulas. There is no such thing and it is not realistic to think of getting rich overnight when you start trading Forex.
The third truth is that creating your own trading system is not even that difficult. What is difficult is to faithfully follow the rules that you set when you develop the system.
There are many articles on the Internet that sell systems, but we have seen practically none that explains how to create your own. This lesson will guide you through the steps you need to take to develop a good trading system that is perfect for you and your profile as a trader. At the end of the lesson, we will give you an example of a system created by us.
Remember that any system you are looking for can be a marvel in the hands of one trader but a real disaster for another. The best thing really is that you develop your own system based on your experience, that you optimize it and get comfortable with it and trust you to follow it to the letter.
Goals of your Forex trading system
We know that you may be thinking that the clear and obvious objective is for your system to make you a millionaire, but although this is a magnificent goal, it is not exactly the goal that will make you a profitable trader in the Forex market.
When you develop your trading system, you should try to achieve two very important goals:
- Your system should be able to identify trends as quickly as possible.
- Your system must be able to avoid false signals.
If you can accomplish these two things in your trading system, you already have many ballots to be successful. The difficult part of these goals is that they partly contradict each other. If you have a system whose sole purpose is to detect trends early, you are probably going to see a lot of false signals.
On the other hand, if you have a system whose sole purpose is to avoid false signals, then you will be late to notice many opportunities to open trades.
You will need to find a way to identify trends early, but also ways to distinguish between true and false signals.