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Forex Trading Strategies vs. Forex Trading Systems.
What is a Forex Trading Strategy?
A forex trading strategy is essentially your individual approach to the forex market; it is not a strict set of trading rules or a software program. It encompasses such aspects as how you enter a trade, how you exit a trade, money management, and psychology. An effective forex trading strategy will supply you with an entry method that gives you an “edge” in the market. This trading edge is what you watch for when analyzing the markets, you ideally want your trading edge to provide you with a win percentage of 50% or better. There are certainly is no shortage of trading “edges” available on the internet for you to pursue, however, this is where you must be careful because the majority of these entry methods are simply too confusing, expensive, or rigid to be effective.
Successful forex traders operate with a clear mindset that enables them to make objective trading decisions. This objective mindset is not something that can be developed overnight however, for most traders it takes years of trial and error and lost time and money before they discover how to obtain an objective trading mindset. The specific forex trading strategy you use has a huge influence on your trading mindset. If you are using an overly complicated trading strategy that makes your forex charts look like a piece of modern abstract art, how do you expect to maintain a clear and objective mindset? The best forex trading strategies are born of simplicity and should complement and induce clear and objective thinking patterns, not inhibit them as so many forex trading strategies do these days.
What is a Forex Trading System?
A forex trading system is typically used to describe strict rule-based trading approaches that can come in various forms. Some of the more popular forex trading systems include those that make use of lagging indicators and those that involve software programs or proprietary programmed indicators. While some of these systems do indeed bring profits to traders for a period of time, there is an inherent flaw with most of these trading systems.
The flaw with many forex trading systems revolves around the fact that they are based on the principle that you must take every single trade signal the system provides for you, otherwise the “edge” that the system provides will in effect be nullified. Many traders are drawn to such rigid trading systems because they claim to fully automate the trading process and thus take away the possibility of making emotional trading mistakes. The one big secret that you will never hear any website selling a forex trading “robot” system or a lagging indicator based system is that you still have to enter the number of lots you want to trade. This means you are still in control of how much leverage you use on each trade and thus still have the capacity to commit emotional trading mistakes. Put simply, any advantage that strict rule-based trading systems have over more discretionary trading strategies is eliminated by the fact that you still must manually enter your position / lot size combined with the fact that there is no flexibility built into the actual trading entries and exits.
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المصدر | 4uinvestment
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