One example of this is to not trade it all. If you don’t trade it all quite naturally there is no risk, but quite obviously there also will be no reward.
Thoroughly researched and tested — every good trading system has been put through the wringer by its creator. Those who are in the know with regard to Forex system development have tested their systems in up, down, and sideways markets as we have mentioned before. They may have also tested them on a variety of different markets in order to assess their intermarket stability.
Something additional keep in mind is that reliable Forex strategies do not create income in the same manner as receiving a weekly paycheck from a job. Even the best strategies can have periods where your account equity dips. This is one of the reasons why those intending to trade Forex for a living are advised to have a capital buffer for those periods in time when things don’t go exactly as planned.
If you’re looking to buy or lease a Forex strategy rather than to create your own you must realize that strategies vary widely in their performance. This is why it is imperative that you scrutinize the performance of each system you are considering.
Reliable Forex strategies are those strategies that have withstood the test of time. For a strategy to fall into this category it has survived in a variety of Forex market conditions such as up, down, as well as sideways markets.
The only way a Forex trading system can get to be reliable is to have been thoroughly researched and tested prior to actual trading. There are two different ways to obtain such strategies and they are to either create your own trading system or buy or lease a trading system from someone else. You can have your favorite indicator, such as moving average on each chart. For instance, you may have moving averages setup on each of a daily, 4 hour, and 15 minute charts. Assuming we are trading based upon the smallest timeframe to enter the trade we would go long when the price of the currency pair is above our moving averages on each of the three charts we mentioned. Using multiple time frames gives the trader the advantage of confirmation.
Our simple example above was done using moving averages, but the multiple time frame trading method can be done with indicators or without indicators. The multiple time frame strategy works great when used with breakout systems as well. This works well for entering both long and short positions.
When currency pairs are in a trading range, meaning that the prices are basically moving sideways you can profit using simple countertrend methods. A simple countertrend method would be to use support and resistance in the opposite way as may be used in breakout systems. In this case you would sell a currency pair when the price moved up to a resistance level and buy a currency pair when the price moves down to a support level.
Naturally the above-mentioned examples were for the purposes of illustration only and are not to be construed as an exact method to use. They are designed to give you a starting point for your own experimentation to find the right set of parameters for you.
Dane Jenings, forex related article writer.