Ah, the foreign exchange market! So exciting and fast-paced. So much risk, yet so much potential. Every new prospector is drawn to the adrenaline rush of speculative currency trading. It is that element of risk that makes success that much sweeter.
It also that same element of risk that drives so many new investors to seek out the ‘ultimate trading system’. You get into Forex and you realize it is not as simple as it looked from the outside. The speed and complexity of market movements is mind-boggling.
Perhaps you’ve already opened a demo account, and practiced making trades. Maybe you went ahead and opened a live account, lost an embarrassing chunk of money, and are back at square one — looking for that ‘magic bullet’.
The question to ask yourself is: “Do I really need a better trading system, or do I just need a better grip on Forex?”
It may surprise you to know that the answer is: “Both.”
Why?
Quite simply, the better you understand Forex, the more likely you are to choose a trading system that fits your needs. Put another way: the less you understand Forex, the more likely you are to choose the wrong trading system!
In order to see why, let’s discuss the nature of Forex trading systems and what they’re really intended to do for you.
First, there are roughly two kinds of trading systems: ‘signal service’ systems and ‘complete’, strategic systems — and I almost hesitate to refer to ‘signal services’ as ‘trading systems’ at all. Keep reading, and you’ll see why.
Signal services are convenient tools for experienced spot traders. The primary role of a signal service is to send you ‘signals’ or ‘alerts’ about market movements as they arise, according to popular Forex indicators like the Relative Strength Index and MACD lines.
Typically, these services send ‘buy/sell’ alerts (and/or general ‘movement’ alerts) to their subscribers via the subscriber’s preferred method of communication: e-mail SMS or text-message alert, etc.
What many of these services do not do, however, is provide with you with a trading strategy or ‘auto-trading’ option. In order to get that kind of service, you must go with a broker who provides a ‘complete’ trading system, and not merely a glorified signal service.
How can you tell which brokers offer truly complete trading platforms?
There are a couple of things to look for when evaluating potential brokers. The first thing to look for is full disclosure of trading strategies.
If a given brokerage company really is in business to help you succeed, then you should easily be able to find some wording on their web site about proprietary trading strategies. Many brokers offer ‘auto trading’ services, where trades are made on your behalf, based on these strategies.
This type of service can be invaluable. However, it may also hinder you if the broker is unwilling to disclose the nature of the strategies involved. Your best bet is to find a brokerage that lets you choose when and whether to use the auto-trade feature.
If the broker provides new clients with in-depth training on their strategies, that’s
even better.
The other thing to look for is ‘specialization’, but this can be tricky. Some brokerages will claim to be Forex specialists, when they are really just ‘fly-by-night’ scams based on risky trading strategies.
It is often far better to go with a ‘name brand’ brokerage that treats Forex as a specialized component within a broader package. What your account may lack in ‘cutting-edge’ options will be more than made up for by common sense policies and safety measures. A really good broker will be as risk-averse with your money as you are.
Finally, it is important that you take the time to develop your own trading strategies. Take the time to sit down and flesh out your entry and exit tactics.
How much do you want to risk per trade? How much margin are you comfortable with trading on? Do you have recovery strategy in the event your trades take you below margin?
How do you intend to manage the overall growth of your portfolio? Will you take profits out or reinvest them to a target goal?
Answering these questions ahead of time will help you choose the right trading system for your needs.
Ever wished you could trade on Forex, but don’t know how? Let me show you the best resources and training materials available online, and start learning today!
http://www.bruisedonion.com/Forex_Report.html