If you are going to trade a currency system you need to create some rules which will govern the execution of your trading signals. You then need to follow these rules with discipline. If your currency trading system is soundly based, it will lead you to long term currency trading success.
Dealing with Anarchy
The forex market is anarchy, it moves where it wants, when it wants and it’s always right and only you can be wrong. Your rules will help you survive and make money in this chaos. If you don’t have a set of rules that dictate your trading signal entries and exits – you will lose.
Many people have a problem devising rules for themselves and taking responsibility for their actions. They are so used to being in an ordered society – the thought of creating their own rules to live by is totally alien to them. Forex trading is the total opposite – you don’t just follow rules that everyone else does, you have your own.
You need to create your own rules and have confidence in them, to help you survive and lead you to currency trading success.
A framework of Rules
The framework should be based on rules for:
- Identifying support and resistance levels
- Identifying overbought oversold levels
- Leading indicators to Confirm trading signals
- Profit taking Signals
- Stop loss exit signals initial placement and trailing
Your rules are there to help you identify low risk / high reward entry points, when the odds are in your favor, as well as to tell you when to exit the market.
Applying Your Rules
You can use totally mechanical rules or you can have a manual override and there are merits to both. While an automated currency trading system suits the disciplined trader, it doesn’t suit everyone. Keep in mind, the human brain if applied correctly, has one huge advantage over a machine – it can think for itself. The human brain is capable of independent thought and no computer can match that.
Whichever route you choose, make sure that your rules are consistent and they are objective so your emotions stay out of your trading and you remain disciplined.
Your rules are the ones that you are going to trust to help you survive in the anarchy that is the forex market and help you come away with long term profits. You can devise them yourself, or use a ready made currency trading system – but above all else, you need to be confident in them and remain disciplined at all times.
You must apply the rules with discipline – this is the key to your trading systems success. If you don’t have the discipline to keep applying your system rules consistently, you don’t have a system.