One rule of thumb that every aspiring entrepreneur should remember is that to make consistent profits, you should know how to do it by yourself, and not rely on other’s efforts. Being independent of other people will help you determine what things are best for your business.
Such rule applies to all types of investments, including foreign currency trading, commonly known as Forex trading. It cannot be said that Forex is the largest existing market around the world, which is estimated to have an excess of 2 trillion U.S. dollars worth of foreign currencies traded each day. It is larger than the magnitude of the New York Stock Exchange, which boasts approximately 50 billion U.S. dollars. Thus, the Forex market exceeds all combined equity markets around the world.
With such huge wealth circulating around the Forex market, one of your financial goals is to grab a major slice of that $2 trillion average daily turnover in the market. How you will be able to get a substantial portion of that average turnover if you do not know how you will handle your Forex business? Although you cannot live in the market alone (you need business partners and/or financial advisers/education to help you along), only you can determine what the best Forex strategy is for you.
To get consistent profits out of your Forex trading career, you need to build your own profitable system—not just a trading system that is marketed at bringing you hundreds of thousands of dollars worth of forex income. You need to be independent—and you need to have your own Forex trading system that will help you achieve your financial goals.
For new traders, it is difficult for them to create their own trading system since they do not have too much knowledge about the Forex market. However, even a neophyte trader can devise a trading system that will fit on his personal preference and needs—in just five easy steps!
Before we discuss the five easy steps towards a profitable Forex trading system, you need to learn first the three main characteristics of a successful Forex trading system. These are as follows:
1. A successful Forex trading system is simple. There is no need for a complicated trading system with 101 indicators attached to it. It is a proven truth that simple systems work better than complicated ones, and they have higher chances of success despite the “brutal” characteristic of Forex trading.
2. A successful Forex trading system cuts losses and runs profits. Keep in mind that you need a trading system that gets consistent profits and eliminates losses quickly, if not instantly.
3. A successful Forex trading system follows long-term trends. You will never cover your losses if you are just generating small profits. Keep in mind that the Forex market is worth $2 trillion U.S. dollars, thus there is no point in trading in exchange for just small profits if you have the opportunity to make trades for larger revenues providing good risk management is followed. Focus on long-term trends and you will be able to see better results.
Now, here are the five easy steps to building a profitable Forex trading system:
1. As previously mentioned, your trading system must be as simple as possible. Integrate a few yet essential rules and an extensive investment management system.
2. Always look for long-term trends (preferably on a weekly basis), then shift to daily charts and to time entry. This will help you analyze market trends efficiently.
3. The ideal way of trading foreign currencies is through a breakout method. Price action trading is very reliable if carried out correctly.
4. Always watch for any break that you will note on your chart, which is commonly confirmed by stochastic crossed with bearish divergence. This will be your great timing tool to whether you will enter a certain trade or not.
5. You must integrate effective time management within your system. Time is gold and is one of your precious resources. Design a trading system that is time efficient—where you can maximize the potential of your time resources to generate consistent profits.
Throw complicated systems in the bin; it will just ruin your entire Forex trading career. Build a simpler one and see for yourself how profitable it is.