Here we will look at simple FX trading systems and why a simple system is more likely to lead you success than a complex one and we will look at why in this article and show you how to put together a simple FX trading strategy for success.

Despite all the advances we have seen in Forex software, news, speed of price delivery and the power of computer processing and software, the amount of traders who lose money has remained the same at 95% which shows that being complex or trying to be clever, when devising a trading system has not helped increase the number of winning currency traders and the reasons for this are:

Forex Trading is a Market of Probabilities NOT Certainties

The advances in technology we have seen, in Forex trading in the last 30 years has seen traders look for the hidden order of market movement but the problem is, there is no scientific order behind Forex price movement. The reason for this is simple – FX prices are made by humans and they do not conform to any set criteria. Humans are emotional and there simply is no hidden order or 100% reliable trading signal.

When you trade currency markets, you are simply trading the odds and when a market is based on odds, the best systems are simple.

Simple FX Trading Systems Are More Robust

In an odds based market, simple systems tend to be more robust than complex ones because they have fewer elements to break and this can be explained more fully, by looking at the concept of curve fitting which is the subject of the next point.

A Simple FX Trading System is Less Likely to be Curve Fitted

Curve fitting is the concept of bending the rules of the system to show a profit on historical data. The vendor of the system keeps tweaking the system rules until it makes a profit.

Of course, no two data sequences ever repeat in the same way again and someone once referred to a curve fitted system as being like shooting at a barn door blind folded and then afterwards, drawing a chalk circle around each shot to make it look like a perfect bulls-eye!

Curve fitted systems normally have:

• Lots of rules or parameters

• Unique rules for trading different currencies

• Unique rules for trading different market conditions

• Inconsistent money management rules or allows the trader to set them

If you look at the numerous FX robots sold online, you will see that there curve fitted and bent to fit the data and that's why they can produce such extra ordinary profits to drawdown but of course in real time trading they fail miserably.

Simple Systems How Simple is Simple?

I know systems which work by just having one trading rule to generate there trading signal and you will see a free system on this site – Richard Donchian's 4 Week Rule which despite its simplicity makes huge long term gains. In my view, the maximum number of parameters a system should contain should be no more than 6 which is plenty.

Final Words

Anyone can win at FX trading with a simple system and providing you can apply it with discipline and keep your losses small, a simple system can make you a lot of money. Don't be intimidated by people telling you Forex trading is complex – its not it's simple and your system should be simple too.