TIPS: MAXIMIZING PROFITS OF FOREX SYSTEMS
1. Define Simple Rules and Follow the Trend
The simpler the trading system is the better. If the trading system is too complicated, it will be very difficult to stick to the rules. Complicated systems are also very confusing. A simple system makes it easy to follow the rules.
2. Eliminate Risk Quickly and Let Profits Run
Minimizing risk is far more important than making money. Our first objective in trading is to make the trade less risky. We do this by entering only high probability setups, setting stop losses, cutting losses quick and never average down, and letting the profitable trades run for a while, just long enough but not too long so as increase the profits. Profitable trades are only kept open as long as the system shows the trend is in place, these transactions should be closed immediately once your exit signal criteria is generated by the system.
3. Choose the Right Currency Pairs
Once you have your system, you will want to start testing it on a demo account. Currencies have their own characteristics different from others. EURUSD, GBPUSD USDJPY, USDCHF are ideal. A system will give different results for each currency pair.
To maximize the profitability of your system find the most active hours for a chosen currency pair and trade during that session only.
4. Use Money Management Rules
Always risk less than 2% per transaction. With compounding, you will be surprised to see how quickly your Forex account grows once you start to trade with a profitable currency system.
5. Keep a Forex Journal
Keeping a log of all your trades will help you to become a better and better and will help you follow the rules of your system. A journal will also keep track of your profitable trades and losses and you can analyze why a setup was profitable and why it was not.
6. Set take Profit Targets
Establish a daily, weekly or monthly profit targets. Once you hit this target. This will stop you from over-trading and will also stop you giving back your profits the currency market. Keep your reward to risk ratio high, a 3:1 reward to risk ratio is best. This means opening transactions only when you have the probability of making three times what you are risking.
Example of signals generated by our Forex system
Example 1: Buy Signal and Sell Signal Generated
Buy signal is generated by the indicator based system, then an exit signal is generated before another reverse sell signal is generated on this chart
Example 2: Two buy signals generated
Two buy signals are generated during the upward trending market
Example 3: Exit Signal Generated
Examples of Signals Generated by a system
Learn Forex Education
The first tip is to learn about the Currency Exchange Market (Learn Forex Lessons), those who don't learn will not improve their results no matter how many tips they have read. By not learning, these traders will keep making the obvious mistakes made by beginners without even realizing what they are doing, Forex is a wide topic and in order to make profits a trader will have to learn first.
Get a Forex System
A Forex system is a must for every trader, a system is used to determine what trading decision to take. A system gives a trader an edge over others who don have a plan. A good plan is one that is back-tested and proven to produce profitable trades. After coming up with your system you should back-test it on a Demo Account.
Learn Money Management
Learn about The Money Management Lessons, don't attempt to trade if you do not have money management rules. The 2 management lesson that you must learn are:
Learn about Leverage and Margin
If you don't know what is leverage and how it works and how it can affect your margin, then you will not make any money in the foreign exchange currency market and you will lose your money in the market.
Have a Written Plan
A plan will take into account all the above tips and summarize them within one document that you can use to trade the currency market.
The first goal should be taking your time to really determine what your goals are and how much money you wish to make. Once this is determined then the following three suggestions will help you on your way to start FX. It is essential to keep all the three goals in mind when executing all of your transactions but at the same time this is not a black and white guide to success.
The first thing is to remember that you really need to work with short term trades until you become profitable and know how to properly monitor these transactions. You should trade short term because this way you can monitor your positions and quickly close any position whose setup reverses. In order to truly benefit from the system you have to be willing to take up the effort to watch the market to see exactly how long you can keep your money invested in the market. Making short-term investments will help you to monitor your trades and control all the risks, do not leave orders open when you are away from your computer or when you are going to sleep, close all transactions and only open orders when you can monitor them.
Although it is very important to increase the amount of trades that you are investing each time that you trade some guidelines should to be followed. The general rule of investing tends to be never to invest more than two percent of your total account equity. This of course makes sense when you have a lot of money in your trading account but what if you only have a couple of thousands. Two percent of $10,000 equals out to be $200. Even though it is safer to follow this rule it really does not make a lot of economic sense with smaller accounts. If you are investing on Forex this is when leverage kicks in to effect and makes all of the difference. In General the more capital you have to invest the better in terms of money management and also in terms of more profits.
The final suggestion is taking a bit of time to make sure that you get all of your details correct before opening any one transaction, this will be best method. Keep it simple makes just as much sense in Forex currency market than anywhere else. Although this may require more time and effort to build up your profits it will save you money in the long term.
Trying to keep your thinking as clear as possible will make your journey easier but knowing when to break from the norm is also important. Moving towards the right path will make success that much more easier to obtain and by learning all of the steps and logic you will be able to continue making profits. Forex is not hard to learn but a lot of traders lose money quickly because of not taking the proper steps in preparation and learning.