Making money through forex trading in the forex market is certainly a very difficult process. Typically, it takes some time to master the skills of statement and complete the preferred results in the forex trading system. Achieving this ability, by and large, depends largely on the personal capability and the power of feeling of an individual. However, there are some factors that play a vital role in deciding the future of your investments in forex trading such as:
Education: Usually, the successful and practical traders approach the forex trading market with a great deal of carefulness and they learn the basics of Forex trading every single day.
Forex trading system: Usually every expert trader has their own forex trading system which acts as a guiding tool. A well-designed and sophisticated Forex trading system can signal you the market sentiments to precision.
Price behavior: The successful traders have the price behavior incorporated in their forex trading system. They rigorously follow the price behavior and play safe.
Money management: The thriving traders know best how to manage their money. Since, there is a great deal of risk in the forex trading in the forex market; they trade wisely so that they can minimize the loss factor.
Trading psychology: The proficient traders have a knack of understanding the psychological factors that influence the decision making process of every trader. They have that so-called gut feeling and intuition to make a successful speculation in the forex trading.
This tool which is known as G7 forex system has worked as magic for many traders in the forex trading market. So far it has created a rage among the traders.The effectiveness of this fool-proof forex trading system can be attributed to the resources it is devised on. This G7 forex system is the result of an extensive and exhaustive technical research, rigorous testing, and years of live trading.
It has been traded for major banks, tested with huge trading orders, evaluated against rigorous statistical testing and followed by uncountable traders across the globe. The G7 system produces profits almost every trading week with the lowest possible loss. If this forex trading system has worked for so many people, it will also work for you. The best part of this most sought-after is its 100 % money back guarantee. Incase, it does not work for you, you are entitled to get all your money back.
Before going head first into trading the forex market, you may want to consider whether or not your forex trading system is actually based on sound concepts that will make you money over the long term. The most important aspect of your forex trading system should be the expectancy it produces. The expectancy of your trading system will give you an idea of how much you could expect to make over a certain period of time. This is explained further below.
Although you should aim at producing a high expectancy trading system, you should also consider exactly what your system is made up of. Most traders would agree that your trading system shouldn’t just be composed of mainly ’lagging’ technical indicators, but rather include ‘leading’ indicators such as price action, and chart patterns.
The Mathematics Of A Trading System
The whole point of a forex trading system is to make you as much profits as possible while keeping your risk down to an absolute minimum. To determine whether or not your trading system does this, a few mathematical calculations can be made to determine how much your system will make on average, over a period of time. This is often referred to as the ‘Expectancy’ of a system.
To calculate the expectancy of your trading system, you will need to take into account the following:
1. How often is your system correct? 2. How much are your profits compared to your losses? 3. How often are you able to trade your system? And 4) What does it cost to trade?
The following is an example taking these factors into account to determine its expectancy. Assuming the following:
1. The system is correct 70% of the time. 2) On average your profits are 2 times the amount you loose (make 80 pips, loose 40 – assume spread cost is taken into account). 3) you are able to trade 3 times per week.
The formula to calculate expectancy is: (probability of a win × average win) less the (probability of a loss × average loss) × opportunity
Using the above values we would conclude: (0.70 × 80 pips) minus (0.30 × 40 pips) × 3 = 132 pips. This means you could expect to make on average 132 pips every week.
Combining Leading & Lagging Indicators
So why include leading indicators in your trading system? The fact is, leading indicators have more predictive power, and can predict market moves before they occur. Lagging indicators cannot do this, however they can still complement other leading indicators. Some well known leading indicators include: pivot points, chart patterns, fibonacci retracements, and candlestick patterns.
In fact candlesticks are probably one of the most powerful leading indicators, since you are observing price action itself. Traders around the world have found that candlesticks can add an extra dimension to their trading system. The reason for this can be largely contributed to Steve Nison’s book Japanese Candlestick Charting Techniques. Here is a quote from the book:
“If you are a seasoned technician, you will discover how joining Japanese candlesticks with your other technical tools can create a powerful synergy of techniques.”
Of course there are many different ways you can incorporate the use of leading indicators in your forex trading system. Here I have aimed at giving you a taste of what is possible. I also recommend that you check out investopedia’s lesson on how to develop a medium term . This lesson also puts forward some interesting concepts which include combining leading indicators with other technical tools.
Conclusion
By including the use of leading indicators in your trading system, you will be able to add an edge to your system that will enable you to catch trends earlier, and hence make more money. And by understanding the basic mathematics involved in determining a trading systems profitability, you should be able to determine whether or not you have a good forex trading system.
Both James De Wet & Bret Freak are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
James De Wet has sinced written about articles on various topics from Forex Trading Forex, Forex Guide. /. James De Wet's top article generates over 8100 views. to your Favourites.
Bret Freak has sinced written about articles on various topics from Forex Guide, Forex Guide and Forex Trading Forex. Bret Freak is the editor of trading-forex-online.com. A website providing information on a wide range of related products and services avail. Bret Freak's top article generates over 8100 views. to your Favourites.