Let’s keep advancing our forex course and get into our favorite part of forex trading: Create your own forex trading system!
If you do a simple Google search for “Forex trading systems”, “trading strategies” or similar words you will realize that there are a lot of 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 the supposed results of that perfect system and your eyes will shine! They will make you think that you can make important 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 you push yourself to buy and give away 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’s impossible to succeed in the long run by using a system that you can’t customize 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 you went as capital for your account instead of paying for magic formulas. There’s no such thing and it’s not realistic to think about 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 you set when you develop the system.
There are many articles on the Internet that sell systems, but we haven’t seen practically any that explain how to create your own. This lesson will guide you through the steps you need to follow 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 whatever system you are looking for may be a wonder in the hands of one trader but a real disaster for another. The best thing is really that you develop your own system based on your experience, that you optimize it and get to be comfortable with it and trust you to follow it to the letter.
Objectives of your Forex trading system
We know you may be thinking that the clear and obvious goal is for your system to make you a millionaire, but while this is a great goal, it is not exactly the goal that will make you a profitable trader in the Forex market.
When developing your trading system, you should try to achieve two very important objectives:
- Your system should be able to identify trends as quickly as possible.
- Your system should be able to avoid false signals.
If you can accomplish these two things in your trading system you already have many ballots to succeed. The difficult part of these objectives is that they partly contradict each other. If you have a system whose sole purpose is to detect trends early, you will probably 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 are going to realize many late opportunities to open trades.
You will have to find a way to identify trends early, but also ways to distinguish between false and true signals.