RSS
Tools
Apr 3
2.2 Forex Trading System

There are two basic forex trading systems, these are mechanical and discretionary systems. In order to urge traders to put the odds in our favor, we need to choose the right notion, the notion that suits our goals and needs.
The trading signals that emerge from mechanical systems are largely technically analyzed in a systematic way. However, discretionary systems use experience, insight and judgment while going in and leaving. What produces better results? What fits better for your trading style? These are the questions we will attempt to answer here.
First we will examine the advantages and disadvantages of the system.
Mechanical systems:
Advantages:
Mechanical systems can be effectively back tested and programmed. It has a firm rules. Whether there is a trade or there is no trade. Mechanical traders are least vulnerable to emotions than discretionary traders.
Disadvantages:
Fores trading systems in most cases is incorrectly beck tested. So as to produce correct results you require tick data. The forex market is always moving. There is a random component in forex market and as well as other markets. The market situations may look the same, but they are always changing.
A system that was successfully last year may not succeed this year.
Discretionary systems:
Advantages:
Discretionary systems can easily change to new market conditions. The trading decisions taken are based on experience and knowledge. Traders come to know which trading indicators have high chances of trade success.
Disadvantages:
They cannot use historical data to predict the current scenario. They cannot be programmed, because there is always a decision to be made. It takes years of hard work to develop the experience necessary to trade successfully and track traders in discretionary system. During early stages of the trade it is extremely dangerous.
What is a better approach for forex traders? The one that suits your personality. For example, if you are a trader who find difficulty in following trade indicators, then its better for you to use mechanical system, where you don?t have to judge every now or than to your system. There you only have to take the trade that your system indicates.
There are certain psychological stumbling blocks that every trader is involved such as greed, fear, anger, etc. Such situation puts you in a state of uncertainty, then its better for you to choose trading mechanical systems. Here you only have to follow what the system tells you, such as, go short, go long, close a trade. You don’t have to make a decision.
However, if you are a disciplined and confident trader, then you better use a discretionary system, as discretionary systems change according to the market situations and you are able to change your trading surroundings as the market varies. For example, if your target is 60 pips on a long trade. If the market abruptly starts to rise up quite strongly, then you have a choice to shift your target to around 100 pips.
I prefer to be a discretionary trader. The reason behind my choice of discretionary systems is that I like to trade on price behavior, as the price behaves same as in the past, but its is never identical, so the result of every trade is not known. On the other hand I do have some strict rules on my system, a number of conditions have to be met before I begin a trade. I find it easy to operate my setup according to the rules. I keep a close eye to the price behavior and at last decide when the opportunity comes.
Before you choose between a discretionary or a mechanical trader there are few points of importance need to be considered.
In Forex trading system you need to make sure that it suits your personality.
You must have some rules and also discipline to strictly follow them.
Take some time to build a perfect system for yourself. Its not that easy, in fact it needs a lot of hard work and dedication. In the end you will surely bear fruit.
Before daring to go live, try it on demo account or small account.

There are two basic forex trading systems, these are mechanical and discretionary systems. In order to urge traders to put the odds in our favor, we need to choose the right notion, the notion that suits our goals and needs.

The trading signals that emerge from mechanical systems are largely technically analyzed in a systematic way. However, discretionary systems use experience, insight and judgment while going in and leaving. What produces better results? What fits better for your trading style? These are the questions we will attempt to answer here.

First we will examine the advantages and disadvantages of the system.

 

Mechanical systems:

Advantages:

Mechanical systems can be effectively back tested and programmed. It has a firm rules. Whether there is a trade or there is no trade. Mechanical traders are least vulnerable to emotions than discretionary traders.

Disadvantages:

Fores trading systems in most cases is incorrectly beck tested. So as to produce correct results you require tick data. The forex market is always moving. There is a random component in forex market and as well as other markets. The market situations may look the same, but they are always changing.

A system that was successfully last year may not succeed this year.

 

Discretionary systems:

Advantages:

Discretionary systems can easily change to new market conditions. The trading decisions taken are based on experience and knowledge. Traders come to know which trading indicators have high chances of trade success.

Disadvantages:

 

They cannot use historical data to predict the current scenario. They cannot be programmed, because there is always a decision to be made. It takes years of hard work to develop the experience necessary to trade successfully and track traders in discretionary system. During early stages of the trade it is extremely dangerous.

What is a better approach for forex traders? The one that suits your personality. For example, if you are a trader who find difficulty in following trade indicators, then its better for you to use mechanical system, where you don?t have to judge every now or than to your system. There you only have to take the trade that your system indicates.

There are certain psychological stumbling blocks that every trader is involved such as greed, fear, anger, etc. Such situation puts you in a state of uncertainty, then its better for you to choose trading mechanical systems. Here you only have to follow what the system tells you, such as, go short, go long, close a trade. You don’t have to make a decision.

However, if you are a disciplined and confident trader, then you better use a discretionary system, as discretionary systems change according to the market situations and you are able to change your trading surroundings as the market varies. For example, if your target is 60 pips on a long trade. If the market abruptly starts to rise up quite strongly, then you have a choice to shift your target to around 100 pips.

I prefer to be a discretionary trader. The reason behind my choice of discretionary systems is that I like to trade on price behavior, as the price behaves same as in the past, but its is never identical, so the result of every trade is not known. On the other hand I do have some strict rules on my system, a number of conditions have to be met before I begin a trade. I find it easy to operate my setup according to the rules. I keep a close eye to the price behavior and at last decide when the opportunity comes.

Before you choose between a discretionary or a mechanical trader there are few points of importance need to be considered.

In Forex trading system you need to make sure that it suits your personality.

You must have some rules and also discipline to strictly follow them.

Take some time to build a perfect system for yourself. Its not that easy, in fact it needs a lot of hard work and dedication. In the end you will surely bear fruit.

Before daring to go live, try it on demo account or small account.

 


Technical Analysis

 

2.1 How To Read Forex Charts

2.2 Forex Trading System

2.3 Pivot Point In Forex

2.4 Perfect Forex Trading System

2.5 Ten Laws Of Technical Trading

2.6 Using Technical Indicators To Identify Trends

2.7 Trends And Corrections

2.8 Open Price And The ATR

2.9 Focus On Higher Grounds

2.10 Indication Of Trend Change In Forex

 


Forex Education

 

The Basics of Currency Forex Trading

Technical Analysis

Technical Indicators

Fundamental Analysis

Intraday Trading

Emotional & Behavioral Part

Risk & Money Management

Trading Guide