One rule of thumb that every aspiring entrepreneur should know is that to make the largest profits, you need to know how to create a forex trading system yourself rather than relying on other’s efforts. Being an independent trader will help you determine what is best for your business and how you want to make your investment grow. This rule applies to all types of investments, including foreign currency, or FOREX trading.
It cannot be denied that FOREX is the largest existing market in the world. It is estimated to trade over 2 trillion U.S. dollars of foreign currencies each day. This is significantly larger than the New York Stock Exchange, which trades only approximately 50 billion U.S. dollars. In fact, the FOREX market exceeds all combined equity markets around the world.
Your Slice of the Market
With such wealth circulating the FOREX market, your financial goal will be to grab a major slice of that $2 trillion average daily market turnover. You will not, however, be able to get your portion of that turnover if you don’t know how to handle your FOREX business. Though you cannot live in the market alone (you will need business partners and/or financial advisers to help you along), only you can determine what the best FOREX strategies are for you.
To get substantial profits from your FOREX trading career, you will need to build your own profitable system. A trading system that will bring you, not just hundreds but, thousands of dollars in FOREX revenue. Such trading systems are available on the market but, as previously mentioned, for real profits you will need to be independent. You will need to develop your own FOREX trading system to help you achieve your financial goals.
For new traders, it is difficult for them to devise their own trading system as they do not have the required knowledge and experience within the FOREX market. Despite this, even a neophyte trader can devise a trading system that will fit into his or her personal preferences in just five easy steps!
Three Main Characteristics
Before we discuss these steps, a successful trader needs to understand the three main characteristics of a successful Forex trading system.
- A successful Forex trading system is simple. There is no need for a complicated trading system with too many rules. Simple systems can often work better than complicated ones, despite the occasionally “brutal” characteristics of FOREX trading.
- A successful Forex trading system cuts losses and runs profits. Keep in mind that you need a trading system that allows the largest possible profits while eliminating losses quickly, if not instantly. Occasional losses are a fact of life in FOREX trading but knowing when to get out is a necessity.
- A successful Forex trading system follows long-term trends. You will struggle to cover your losses if you are only generating small profits. The Forex market is worth $2 trillion so the savvy trader will look to take as much as is offered. Focus on long-term trends and you will be able to see better results.
Five Easy Steps
With these characteristics in mind, we move to the five easy steps to build a profitable FOREX trading system:
- As mentioned, your trading system must be as simple as possible. Integrate a few yet essential rules into an extensive investment management system.
- Always be on the lookout for long-term trends (preferably on a weekly basis), then shift to daily charts and to time entry. This will help you analyse market trends efficiently.
- The ideal way of trading foreign currencies is through the breakout method. Knowing when a currency is breaking a resistance level and when it is likely to carry on in that direction.
- Always watch for any break on your chart, which is commonly confirmed by Stochastic crossed with divergence. These terms can seem complicated, however, most charting software will do these calculations for you. In time you will be able to read the lines on the chart like a pianist reads sheet music. This will be your great timing tool for whether you will enter a trade or not.
- You must integrate effective time management within your system. Time is gold and is one of your most precious resources. Design a trading system that is time-efficient—where you can maximize the potential of your time resources to generate profits.
Get away from complicated systems; it will just ruin your FOREX trading career before it begins. Build a simpler one and see for yourself how profitable it can be. To get started, download some of our amazing indicators here for MT4 and MT5.