Forex Trading Guide - How To Win At Forex Trading Section
How To Win At Forex Trading Navigation
Explain Forex
Fibonacci Retracements Forex
Forex Real Time Trading System Design
Forex Dictionary
Forex Infomercial
Professional Forex Trader
Forex Market Times
Forex Info
Forex Course
Forex Rss
Neural Networks Forex
Simple Forex Trading Systems
Forex Shipping
Forex Trading Courses
Manchester Forex Seminar
Forex Rss
Professional Forex Trader
Forex Resources
Forex Funds
Micro Forex Trading
Forex Secrets
Us Dollar History
Forex Mentoring
New Hampshire Forex Seminar
2005 Best Seller!
Best How To Win At Forex Trading products
Main How To Win At Forex Trading sponsors
Welcome to Forex Trading Guide
Article
There are basically two types of Forex trading systems, mechanical and discretionary systems. The trading signals that come out of mechanical systems are mainly based off technical analysis applied in a systematic way. On the other hand, discretionary systems use experience, intuition or judgment on entries and exits. But which one produces better results? Or more importantly, which one fits better your trading style? These are the answers we will try to answer on this article. About the Author: Raul Lopez is a full time Forex trader, his trades are based on a price behavior approach. Raul is also founder of http://www.straightforex.com a high quality Forex training company.
We will first analyze the pros and cons about each system approach.
Mechanical systems
Advantages
This kind of system can be automated and backtested efficiently.
It has very rigid rules. Either, there is a trade or there isn’t.
Mechanical traders are less susceptible to emotions than discretionary traders.
Disadvantages
Most traders backtest Forex trading systems incorrectly. In order to produce accurate results you need tick data.
The Forex market is always changing. The Forex market (and all markets) has a random component. The market conditions may look similar, but they are never the same.
A system that worked successfully the past year doesn’t necessary mean it will work this year.
Discretionary systems
Advantages
Discretionary systems are easily adaptable to new market conditions.
Trading decisions are based on experience. Traders learn to see which trading signals have higher probability of success.
Disadvantages
They cannot be backtested or automated, since there is always a thought decision to be made.
It takes time to develop the experience required to trade successfully and track trades in a discretionary way. At early stages this can be dangerous.
Now, which approach is better for Forex traders? The one that fits better your personality. For instance, if you are a trader that finds it hard to follow your trading signals, then you are better off using a mechanical system, where your judgment won’t play an important role in your system. You only take the trades that your system signals.
If the psychological barriers that affect every trader (fear, greed, anger, etc.) puts you in unwanted scenarios, you are also better off trading mechanical systems, because you only need to follow what your system is telling you, go short, go long, close a trade. No other decision has to be made.
On the other hand, if you are a disciplined trader, then you are better off using a discretionary system, because discretionary systems adapt to the market conditions and you are able to change your trading conditions as the market changes. For instance, you have a target of 60 pips on a long trade. But the market suddenly starts trending up pretty strongly, then you could move your target to say 100 pips.
Does it mean that trading a discretionary system has no rules? This is absolutely incorrect. Trading discretionary systems means that once a trader finds his/her setup, the trader then decides what to do. But every trader still needs certain rules that need to be followed, such as the size of the position, conditions that have to be met before thinking to get in the market, and so on.
I am a discretionary trader. The main reason I chose a discretionary system is that my trades are based on price behavior, and as you already know, the price behaves similar to the past, but it is never identical, therefore the outcome of every trade is unknown. However, I do have rigid rules on my system, certain conditions have to be met before I even think in getting in a trade. This keeps me out of trouble, once my setup is present and in accordance with the rules I have set, then I closely watch the price behavior and finally decide whether it is a good opportunity or not.
Whether you choose to be a discretionary or a mechanical trader there are some important points you should take in consideration:
1. You need to make sure the Forex trading system you are using totally fits your personality. Otherwise you will find yourself outguessing your system.
2. You also need to have some rules and most importantly have the discipline to follow them.
3. Take your time to build the perfect system for you. It’s not easy and requires time and hard work, but at the end, if done correctly, it will give you consistent profitable results.
4. Before going live, try it on a demo account or even on a small account (I will go for the second option, since psychological barriers will be present.)
How To Win At Forex Trading News
how to win at forex trading
European markets rose strongly Friday after hefty day-earlier gains on the U.S. and an overnight rally in Asia as investors bought up heavily sold-off stocks, but worries about Wall Street's upcoming open capped the gains. The FTSE 100 index of ...
Read moreEurope stocks higher ahead of Wall Street open - Forbes
NEW YORK, Nov 14 (Reuters) - Citigroup Inc plans to shed about 10 percent of its global workforce, a person familiar with the matter said Friday, as it tries to restore profit and quiet mounting criticism of Chief Executive Vikram Pandit. The cuts ...
Read moreWRAPUP 1-Citigroup to cut 10 pct of jobs - source - FXStreet.com
NEW YORK, Nov 14 (Reuters) - Citigroup Inc plans to shed about 10 percent of its global workforce, a person familiar with the matter said Friday, as the bank tries to return to profitability and faces mounting criticism of Chief Executive Vikram ...
Read moreWRAPUP 2-Citigroup to cut 10 percent of jobs -- source - FXStreet.com
Dubai, Oct 27 (IANS) Even as the Indian rupee hovered around the 50-mark... changes to its rupee futures contract. The revised Indian rupee futures...;'The DGCX Indian rupee futures contract has generated considerable market interest IOC to meet Euro ...
Read moreLatest Pictures - Newstrack India
NEW YORK, Oct 17 (Reuters) - The U.S. dollar rose against the euro on Friday, while the yen gained in volatile trading, as financial distress and economic weakness beyond the United States persisted, giving the greenback a safe-haven bid. Weakness in ...
Read moreFOREX-Dollar, yen rise as global risk appetite falters - Reuters
Many forex traders spend so much of their time looking for that holy grail forex system that will make them rich, but the fact is that if you can learn to accept your losses, then you don't necessarily need a system with a very high success rate in ...
Read moreForex Trading - Why You Need To Learn How To Accept Losses - Best Syndication
Nov 07 - Forex Trading Weekly Forecast - 11.10.08 Nov 07 - U.S. Non-Farm Payrolls Fall 240K in October, Unemployment Rate Surges to 14 Year High, But What About the Dollar? Nov 06 - How Much Does the US Dollar Forecast Depend on US Non-Farm Payrolls ...
Read moreForex Trading Survival Kit to the Current Market Conditions - DailyFx
Nov 13 - Euro, Pound Whipsaw After German GDP Figures Signal Recession Nov 13 - German Economy to Shrink in the Third Quarter, Confirm Recession (Euro Open) Nov 12 - Japanese Yen Surges as US Treasury Scraps Plans to Buy Troubled Assets Nov 12 - Euro ...
Read moreSeven Trading Tips For Highly Volatile Markets - DailyFx
Talk about ironic ... I originally submitted this article to my editor on Aug. 29, after the Dow had fallen "all the way" to 11,500 -- but it never got published. The plan was to take you back to 1996 -- when the Dow crossed the 6,000 mark for the ...
Read moreWhat to Do When the Dow Hits 7,500 - Motley Fool
China’s science and engineering community has been distracted the past few months by a series of scandals involving accusations of fraud and plagiarism . But the incidents, however embarrassing, don’t seem to be slowing the rush of U.S. companies ...
Read more