Forex Trading Systems
A forex trading system is composed of a series of rules, which give traders entry and exit levels for a given currency. These levels, usually displayed on the currency chart, are buying and selling signals, which can be implemented either manually or automatically
When using a manual trading system, traders read the buy and sell signals on the chart, and interpret them to decide whether to buy or sell. In an automated trading system, the computer executes the trading signals by placing trades automatically. One of the main advantages of automated trading systems is that they remove the emotional and psychological components of trading that often lead to wrong decisions.
Trading Systems Approaches
FX Trader Magazine trading system experts have written extensively about the different approaches to using and building forex trading strategies.
For Caspar Marney - a successful proprietary trader,expert in building trading systems- the first step in developing a forex trading strategy is to find an edge. In order to build solid FX trading systems,traders who have found an edge - even a relatively small edge - will have a strong advantage as they will be able to generate an ongoing revenue stream, which will become consistent in the long term. Using a good historical database and a solid testing software is also part of building a strong currency strategy. To be valid, a trading strategy should be thoroughly back-tested and show consistent returns over a long period of time.
Windor Hoang explains why traders should use an automated trading approach based on the method used by successful institutional traders,which includes automated trading, diversification, and a counter-intuitive approach to trend trading strategies.