Is There a Best Way to Trade Forex Markets?
When most traders come to trade the markets they obviously want to know the best trading system or method which they should use to make money and there are plenty of systems which make the claim of being the top system of all but this is just marketing copy and the systems have never made any money with real time trading signals. If you take the time to learn the basics of trading currency, you will come to the following conclusion:
Many different methods of trading make money and they all have advantages and disadvantages which can range on the time spent applying the method of the drawdown in relation to the profits.
All good trading systems are under pinned by a strong method of risk control so while all the various methods which make money have different ways of doing so they all have robust money management which is in place to preserve account equity.
Some traders will want to make big profits and trade for a living, while others are happy with a target growth which beats as index, such as bank interest rates or the S&P 500. All traders have different ideas, in terms of what is a satisfactory target growth for them.
Some trading systems which are diversified and trend following by nature will require more starting capital than one which is say based on swing trading.
Just from the above points, you will already begin to see that the best trading system is not universal it will depend on various factors. However its not just about picking a trading strategy which you like in terms of growth and in terms of capital its also to do with your personality. We have written about it elsewhere – there is no point in trading an aggressive system and liking the profits but having a risk averse nature! The reason is - as soon as losing trading signals start to eat into your trading equity, you will quit using the system rules as they should be used. Of course, if the rules of the strategy are not followed EXACTLY, the system ceases to be a system.
Lets try and outline, what the best way of trading the markets will be for you to follow by looking at the outer game of trading which consists of trading education and what systems make money and which don't. We will then look at the inner game of trading which is the type of trading methodology which is best for your personality. When you have matched your strategy to your unique personality, you will have the best way to trade currency markets for you.
The Outer Side of Forex Trading
This is getting a strategy which makes money and there is plenty of information on this site about the methods which work and which don't but just to summarize quickly the methods which don’t work do NOT use – Forex robots and Expert Advisors with made up performance records, any system which says it's found the way to see into the future with some hidden code, any scientific system or any strategy which is based on complex algorithms. These methods don't work.
Methods which do work are simple strategies based around trading probabilities and you have to decide, if you are going to use a system with fixed rules and generate your own trading signals manually. You also have to decide how much time you have to spend on your trading.
In general terms a fixed rules trading system suits traders who are patient and are looking long term and wanting a decent second income. Manual systems can be adapted to suit any type of trader and can have as little or as much risk as the trader wishes. If you see a system you like, you MUST make sure it matches the type of person you before you trade it. The reason for this is you won't follow a system unless it matches your character. You must fully understand it, have confidence in it and follow it in a disciplined fashion.
The Inner Side of Forex Trading
We have written about drawdown tolerance else where on this site and you need to make sure the losses a trading method is likely to have. Decide how much you are happy with and pick a system which matches the risk your prepared to take. Also in terms of reward you are looking for, always keep in mind the bigger the profit potential - the bigger the risk. So if you are looking for big gains, you will have a big draw down at some point so you need to able to cope with this.
There are trading strategies which are short term which suit traders who like to be in and out of trades quickly and longer term strategies, for more patient traders. The risk reward of a system can be tweaked by simply altering the leverage used. Keep in mind, you can make good profits using no leverage at all and of course most brokers will let you go up to 200:1 or more.
Synergy Inner and Outer = Best Currency Trading Strategy for You
There is no best way to trade currency markets but there is a best currency trading strategy for you and the above points will help you choose one. If you use a mechanical trading system or get an education and develop your own method, the key point is to understand what your doing and choose a risk to reward to trade which means you can still trade with discipline. If you do this,you will become a successful currency trader and be able to generate profits, in the global currency markets.