3 Signs That Tell You to Stay Away
Using Forex systems can give you an advantage when trading in the Forex market. If you find a good system to work with, you can make some serious money. If you find that system and mistakenly think that it is a good system, you could end up eating ketchup packets from your favorite fast food restaurant for sustenance. If you see these 3 things in a system...turn around and run.
Too Many Trades / Poor Money Management
When you are a newbie in the Forex market, you may be impressed by a trading statement that has tons of trades on it. You might see Forex systems that places 100 or 200 trades per day and they are all profitable. You suddenly start to do the math in your head. "Wow...if this dude can make $124,000 in a week with a $100 investment, I could make a million dollars in just a few weeks!"
The problem with this scenario is that it is simply not realistic. While some good systems do trade often, you need to be careful if the system is simply placing a lot of trades and leaving them open to hit their take profit. If you have 50 trades open and the market moves in the opposite direction about 500 pips, you're pretty much screwed. You can margin out your account in the blink of an eye. All it would take is an earthquake or a tsunami or something else that you can't predict in a financial center and traders would freak out. Something crazy like this can move the market quickly and your account is then depleted.
Before buying a trading system, you need to make sure that it uses sound money management. You do not want to risk more than 3-5% of your account at any one time. Anything beyond that is usually asking for trouble. Unless of course, you've found the Holy Grail of Forex trading. If this is the case, you probably shouldn't be reading this article anyway, so get back to your buckets of cash and strawberry daiquiris on the beach.
One of the worst things that can happen is when you invest in one of the many Forex methods out there only to find out that you'll have to spend 24 hours per day in front of your computer waiting for a trading opportunity to come up. While this is a slight exaggeration, many systems are way too time consuming for the average trader. Unless you're ready to quit your job right this moment (and forgo the paycheck that comes with it) this really isn't realistic.
Another problem that often comes up occurs when the system requires you to trade at a time that is not convenient for you. For example, if you are in the United States and you get a system that requires you to trade during the London session. You're probably not going to be able to get up at 1:00 or 2:00 AM to trade every night. While you might do it for a few days, you'll probably decide to keep sleeping after you experience your first big loss. When buying a system, you need to find something that fits your schedule and is realistic.
Broker Specific Strategy
In some cases, you might run into a system that requires you to trade on a particular broker. If this is the case, you may want to be a bit skeptical. While, in theory, there is nothing wrong with being tied down to specific Forex brokers, it can paint you into a corner. If something goes wrong where you can no longer use the broker for some reason, you lose your moneymaking strategy. If you are too dependent on this particular strategy to make your money, you will basically be out of luck. Finding Forex systems that are applicable to any broker are generally your best bet.
Return From Forex Systems to Forex Trading Systems
Return From Forex Systems to Forex Trading