Forex Trading System

Hi traders, today I want to talk to you about what a Successful Forex Trading System is all about!

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Forex Trading System
Winner’s Edge Trading

As shown in the graphic above, a Forex Trading System is a structure built on some very important foundations:

A successful system needs to be constantly supported by an accurate entry strategy, a detailed trade management plan, rigid risk management guidelines, implementation of effective tools, and a detailed trading plan.

Entry Strategy:

The entry strategy is critical to the success of a system. The entry strategy, above all else, must put you in position to make a profit. It is the entry strategy that decides at what point and for what reason you are going to risk your hard earned dollars, so you must be confident in it!

In this video, I want to talk a minute about what an Entry Strategy really is

[leadplayer_vid id=”50EDC86689BB8″]

Again, the most important element of an Entry Strategy is to set yourself up for success and give yourself profit potential. Your entry strategy does not need to be perfect, it only needs to give your system a chance to make consistent profits.

A mediocre entry strategy with a great system around it is better than a great entry strategy with no system around it!

Trade Management:

Your trade management strategy describes how you will handle a trade after making the entry.

The most important part of your Trade Management strategy is having it written out in your plan; you must know how you are going to handle the trade ahead of time so that you are not making rash, emotional decisions with money on the line.

This is probably the most complicated aspect of your trading system because there are so many aspects to consider when you have a live trade in the market. Here are just a few of the possibilities that you need to have a plan for before you ever take the trade:

  • Is there a hard profit target?
  • Is there a trailing stop?
  • What system do you use to trail the stop?
  • When does the trailing stop kick in?
  • Do you take partial profit?
  • How much profit do you take?
  • When do you take the partial profit?
  • How many times do you take partial profit?
  • Is there a point where you would add to the trade?
  • Will you add if it is winning or losing?
  • At what percent of winning or losing will you add?
  • How much will you add?
  • Is there a point where you would add a hedged position?
  • When would you add a hedged position?
  • How much of a hedged position would you add?
  • Should you ever pull the entire trade off before it hits a stop or target?
  • How do you handle the trade if news is coming out?
  • How do you handle the trade if other trades are in play?
  • Do you leave your trading station with a live trade in play?
  • How do you set up a live trade if you are leaving or going to bed?
  • How do you handle a trade if it is struggling at support or resistance?
  • What do you do if you accidentally enter an incorrect size on the trade?
  • How long will you hold a trade if it is floating around the same price?
  • Will you take an entry on a pair if you are already in the same direction on a correlating pair?
  • How many trades will you take on at once?
  • Will you hold a trade over the weekend?
  • Will you hold trades that earning negative interest in your account?
  • How long will you hold a trade that is earning negative swap?
  • What if there is a signal, according to your entry rules, in the opposite direction before you get out of the trade?

All of these things, and a lot more, are things that a trader could do with a live trade in play, and all of them should be planned ahead of time with a strict set of guidelines. If any of these things apply to how you would manage your trade, you should have a detailed plan written out as to how you execute the management strategy.

Here is a video to give you an example:

[leadplayer_vid id=”50EDC8C4849EE”]

Hopefully, that gives you an idea of how to implement your trade management strategy.

Risk Management:

Risk management is vital to a successful Forex Trading System.

Your Risk Management plan is your guide to exactly how much money you will put on the line for a given trade.

It will be impossible for you to make money on any kind of consistent basis without a solid risk management plan in place–you can’t build on capital until you master preserving capital.

Consistency in your risk management is very important to your success. Risking different amounts of money on different trades (without a strategic reason for doing so) is an easy way to get yourself in trouble.

For instance, something that many beginner traders struggle with is increasing the size of their trade simply because they are hoping to make more money…

This is a recipe for disaster because it means that there is no logical way for their system to be profitable. They may have won a lot of trades, but if they lose on one where their risk is out of control, they’ll be at a net loss regardless of their track record.

Remember, trading is about math. If you win 5 trades at a 1/1 Risk to Reward ratio and are risking 1% per trade, then you made 5%–that is great. But what you have to guard yourself from doing is then deciding to risk 2%… if you lose 3 trades, you are at a net loss even though you want the majority of your trades at a 1:1 ratio. Trading is hard enough as it is, you cannot afford to handicap yourself by not being consistent and letting yourself lose money even when you are trading well!

One of the most frustrating things about trading is that even when you are making good trades, it doesn’t mean you are making money. You be up hundreds of pips and still be losing money if you are not managing your risk well, and this is why being consistent with your Risk Management strategy.

Tools:

A trader’s tools are a critical part to his success.

The success of a Forex Trading system requires you to use what you have effectively, and that certainly includes the implementation of tools.

Depending on your specific strategy, the tools you use may be very different than another successful trader, but what’s important is that you are using the tools to increase profitability.

Your tools may consist of your trading platform, your computer with multiple monitors, signal software or alerts, indicators, a trading mentor, etc.

There are a host of tools that traders can use as a benefit to their system; however, one must always be careful not to over-complicate the system with all that is out there.

One of the most common things we see are traders who over-complicate their system by trying to incorporate every tool out there into their system.

What ‘s important to understand is that, although there are thousands of tools out there that could potentially benefit a Forex Trading System, they are not all necessarily going to work in conjunction with your personal strategy or with one another.

In my opinion, it is important to have a few critical tools that you are comfortable and confident with that can help you become a more profitable trader.

Here is an Example of a Tool that I use:

[leadplayer_vid id=”50EDC91FB8697″]

Hopefully, that gives you an idea of what an effective tool is and how it can benefit your trading system.

Plan:

Your plan is what ties all of these things together. Without a plan to execute your entry strategy or risk management or money management there is no way a Forex Trading System will be successful.

Your plan should include a very detailed set of directions for exactly how all of the components of your system tie together.

Not only should your plan include the steps for execution of the different aspects of your system, it should also list your goals. Detail, in your plan, what you wish to accomplish by successfully executing your trading system.

Again, the plan is really what puts all of these components together and sets you up for success. The indication of a great plan is knowing that if you follow it you will succeed!

I hope you guys enjoyed this article, I would really appreciate feedback in the comment section and shares on Twitter and Facebook!

Talk Soon!

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Winners Edge Trading was founded in 2009 and is working to create the most current and useful Forex information and training available on the internet.

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  • Pete Tokarczyk

    Since most of the comments were over two years old, I’ll comment to update the post.
    Thanks Casey and Nathan for this post.

    As for my personal trading plan, it changed after becoming a member learning your system at WET. It was a great starting point.

    Thank you.

    I now am learning advanced entry and exit techniques to add to my plan.
    Advanced training from a 40 year Master Trader.
    That also was part of my plan – Education.
    Learning how to become a full time professional trader.

    I was blessed to be placed within a tight knit group of professionals now but I do thank you for providing quality training and being a great staring point for me and many others.

    I trust you will have continued success for many years to come.

  • Farah

    Thanks Casey and Nathan

  • Paul, thanks for the feedback we truly appreciate it.

  • your welcome and please keep coming back.

  • Steve, we plan on it, thanks for reading.

  • Geoff, I agree that was good stuff.

  • Thanks Stuart

  • you are welcome

  • Great Comment thanks

  • your welcome

  • Big, Thank You.

  • Thank you for reading

  • your welcome

  • ILQ doesnt trade gold or silver.

  • Thanks

  • I hope you can find success in following your trading system.

  • Your welcome.

  • Jim, that is only available for one of our members.

  • jim joyce

    thanks natham,how do i purchase the trade management tool??

  • Dan

    Very informative in just a little different manor. Thank you.

  • JoeR

    Thanks Nathan. This is exactly what I (and all of us) need to hear. But it is easy to hear it, and to agree with it, but somehow is amazingly hard to do. Maybe because the steps are so simple I think they can’t be that important? But when I break these ‘rules’ I don’t do as well! Yet I am always tempted to break them. Somehow it feels like following them is taking my control away, where as in fact it is the opposite – they give me control (but my feelings say otherwise!)

  • Michael

    Next time Silver and Gold make a dip ,can you make a buy within my ILQ account with a target price of $105 for silver and $5000 for gold ?

  • danny

    Great info you and casey are truely educators

  • Your sacrifice is helpfull.

  • raj

    awesome stuff, many thanks

  • SANJAY

    Big service to struggling traders. Thanks a lot

  • rick

    thanks this was very helpful.

  • MichaelT

    As ever, a relevant and interesting article. Put simply and concisely. Thank you

  • Urs

    Thank you for these very important and helpful tools.

  • Stuart Harper

    Great basic practical information. Thank you very much

    Stuart H

  • Glad you like it 🙂

  • Geoff C

    Nathan, – another great article. Really appreciated the comments about the importance of planning.

  • Steve O

    Thanks Nathan, as always a fantastic report. Keep up the great work!!!~

  • dave

    Good stuff, I think I’ll read/watch it few times and maybe It’ll sink in! More please! Thanks for passing on your expertise, it’s very much appreciated. However, to remember the list of considerations before placing a trade is a challenge …………. maybe that comes when you get the “feel” for it, as they say.
    Keep giving these snips of info, they’re logical and I really appreciate your daily insites. Thanks

  • R.JOTHI

    Respected Fx GOD……………………………………….

    Realy Realy Real $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$uper!!!!!!!!!!!!

  • Paul

    Nathan & Casey

    You are putting some phenomenally powerful stuff out here

    Thank-you so much for your attention to detail and advocating the benefits of simplicity, clarity (of chart presentation and of mind), planning (you don’t know what the market will actually do, you just believe your strategy has identified a high probability potential trade. So, you must know that if it does X you will do Y and if it does A you will do B, in advance of X or A actually occurring ) Thus helping to remove emotion from your trading and instilling consistency & discipline in the execution of your plan

    Great stuff, thank you so very much

  • George

    Great article, good information, keep it up please.

  • what a great article. thank for sharing.

  • I think that all depends on your personal trading style.

  • yes those are some key components to a great system.

  • John, It is reserved for our clients, jump on the waiting list to learn about how to get on board.

  • John

    What a great Tool! It must save huge amounts of time in setting up and managing trades. Is it available to ordinary traders like me?

  • Great article, it’s so important to not overlook the basics. Over looking the basics is like trying to build a house without a foundation, won’t last too long in this windy market. 🙂

  • Forex Systems Reviews

    Great sharing… Yeah it is right that once we have set up specific entry rules, solid risk management, and a
    complete trade management guide, we are on our way to having a Forex
    Trading System.

  • Dassana

    Hi Nathan, 
    Great article… I guess rules will be much simpler if you scalp.

    I always hear that institutional dealers always specialized in one currency pair. But most of the time retail investors try to be master of all… so the question is should we just concentrate on one pair and be the best on that pair or look at all the opportunities?

    Cheers
    Dassana Jayalath