This article looks at the different parts that make up forex trading systems.
When you trade on the forex market you have to consider the forex trading systems that you should have. There are a number of parts that should make up your forex trading systems. When you look at these different parts you need to consider how they affect your trading and what you are going to do on the market. The parts of the forex trading systems that you have to consider are the strategy, the risk management plan, the trading schedule and the money management plan.
The Trading Strategy that You Use
The first part of your forex trading system will be the strategy that you are going to use to trade. The strategy will impact a number of other parts of your trading system. The strategy that you use needs to help you work toward your trading goals. The strategy should also be one that you are comfortable using. If you are not comfortable with the strategy then you are not going to stick to it and this will lead to losses on the market.
The Forex Trading Systems Risk Management Plan
The risk management plan that you have is a vital component of your trading system. If you do not have a risk management plan then you are not going to be able to control the risks you are taking. When you take too many risks you are increasing the chances of losing everything on the market. There are a number of points that you have to include in your risk management plan.
The first point is the loss per trade that you are willing to take. Most traders will set this to 2% of their trading account. If you are a more conservative trader then you can look at setting this amount at 1% of your trading account balance.
Another point that you have to consider is the risk capacity that you have. When you look at the risk capacity of your trading you are going to be considering your risk tolerance and the financial buffer that you have. Risk capacity will determine all the risks that you are able to take on the market from where you can place your stop loss to the leverage that you use.
The Trading Schedule
The trading schedule that is included in your trading system will tell you when you should and should not trade. You need to determine the times on the market when you will trade the best. This will relate to the market sessions, the strategy you use and the currency pairs you are trading. There are certain times when certain strategies and currency pair will trade very well and you will want to trade during these times.
The Money Management
There are a lot of different things that go into forex money management. One of the most important aspects is the amount you are willing to lose per month. There are many traders who set this at 6% of their trading account balance. Once you reach this amount you will have to stop trading on the live market.