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Forex Strategy
By OnTopic | August 3, 2010
There are a literally thousands of different forex trading systems for sale today on the internet. Determining which of these is the best one to use can be a very time consuming and frustrating task for the beginning trader. Finding a truly effective forex trading system is so difficult because almost all of them claim to be the best or make bold promises about instant success. How can an aspiring forex trader figure out what trading system he or she should put their money and time into? The first course of action is to distinguish between forex systems and forex strategies.
Rigid trading rule-sets like the typical forex trading system, essentially think for the trader. Most forex trading systems are typically either derived from a strict set of rules about how to use lagging indicators, or they are a computer program that tells you exactly what to do and when to do it. The problem with these rigid rule based trading programs is that they attempt to eliminate the human factor from trading. It is true that this might be a good thing due to the fact that it can help eliminate many emotional trading errors, but it also eliminates any flexibility and human “gut” trading instinct, this can work against you in the long-run as often times it is this “gut” trading instinct that separates the winners from the loser.
What precisely is a forex strategy then? A forex trading strategy isn’t a rigid rule based trading system, instead, trading strategies teach you an insightful way of thinking about the market, rather than following rules. Forex trading strategies allow you to utilize discretion and the skill that you may have developed from spending hours studying the charts. Essentially when you use a forex trading strategy you are operating on a solid foundation of technical and fundamental trading concepts which work to frame how you see and think about the forex market. When you get this foundation in the form of a time-tested and highly effective yet simple trading strategy, you give yourself the best chance at becoming a consistently profitable forex trader.
The main underlying issue that determines whether or not a trader can become profitable on a regular basis in the forex market is how well disciplined they are. You can be an average market technician but if you are extremely disciplined you will be a more profitable trader than the brilliant market technician with no self discipline. Many people like the idea of forex trading systems because they promise to fully or nearly fully automate the process of trading, which seems like it would help them remain disciplined. Unfortunately this eliminates the possibility of using your own brain to make trading decisions, and while this is good for helping to maintain discipline, it is bad for being able to take advantage of the power of human intellect. The most profitable route to take is to learn how to be disciplined while using a forex trading strategy that provides you with the best opportunity to profitably read movement of price.
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