http://www.TheForexNittyGritty.com - Develop a Forex Trading System - If a beginning trader wishes to profit from fluctuations in the US Dollar, Swiss franc or Euro versus other currencies he will need to develop a Forex trading system. Although it is possible to let a team of traders and programmers develop a Forex trading system for you it is important that any foreign currency trader understands the ins and outs of the system. Even if you plan to purchase a trading system it is an excellent exercise to think through the various aspects of foreign currency trading in order to put things in perspective. So, if you are going to develop a Forex trading system or purchase one “off the shelf” what are the important parts?
Which Currency Pair and When
People trade foreign currencies for two basic reasons. Companies doing business internationally need to exchange currencies in order to make and receive payment for goods and services. These folks follow fundamentals and use Forex technical strategies in order to hedge the risk of currency fluctuation between the signing of a contract and final payment. Currency speculators simply seek to profit from price changes between any given pair of currencies. To a degree it is easier to develop a Forex trading system for hedging currency risk because the trader is only interested in one pair of currencies and one specific time frame. On the other hand a currency speculator will commonly keep his eye on a number of currency pairs in order to trade the most profitable pair at the most profitable time. Thus a speculator will need to allot time to seeking the most profitable pairs to trade and may subscribe to an alert service in order to trade when price action is potentially most profitable.
Which Market to Trade and What Time of Day
The major Forex exchanges are London, New York, and Tokyo. The sum total of their business hours allows a trader, in theory, to trade around the clock. However, humans need sleep. Traders also need prep time to scout out trading opportunities, learn more about trading strategies, review results, and modify their trading system. In order to develop a Forex trading system that works for people, time of day, available hours and organization of work flow are crucial. Folks wishing to trade the post tsunami Yen versus other currencies may wish to work during Tokyo business hours while those trading the British Pound may wish to work London business hours. For a trader living in Miami, Chicago, Denver, or San Francisco this will require other arrangements in order for the trader to have a personal, social, or family life.
How Much Do You Want To Risk and How Do You Protect Your Money?
Success is never guaranteed in Forex trading. Traders typically trade using a margin account. Then they leverage their trades which can greatly magnify profits but can also magnify losses. Smart traders also use trailing stops in order to lock in gains and avoid disastrous losses.
2. IF A BEGINNING TRADER WISHES TO
PROFIT FROM FLUCTUATIONS IN THE US
DOLLAR, SWISS FRANC OR EURO VERSUS
OTHER CURRENCIES HE WILL NEED TO
DEVELOP A FOREX TRADING SYSTEM.
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3. ALTHOUGH IT IS POSSIBLE TO LET A TEAM
OF TRADERS AND PROGRAMMERS
DEVELOP A FOREX TRADING SYSTEM FOR
YOU IT IS IMPORTANT THAT ANY FOREIGN
CURRENCY TRADER UNDERSTANDS THE
INS AND OUTS OF THE SYSTEM.
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4. EVEN IF YOU PLAN TO PURCHASE A
TRADING SYSTEM IT IS AN EXCELLENT
EXERCISE TO THINK THROUGH THE
VARIOUS ASPECTS OF FOREIGN CURRENCY
TRADING IN ORDER TO PUT THINGS IN
PERSPECTIVE.
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5. EVEN IF YOU PLAN TO PURCHASE A
TRADING SYSTEM IT IS AN EXCELLENT
EXERCISE TO THINK THROUGH THE
VARIOUS ASPECTS OF FOREIGN CURRENCY
TRADING IN ORDER TO PUT THINGS IN
PERSPECTIVE.
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6. WHICH CURRENCY PAIR AND WHEN
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7. PEOPLE TRADE FOREIGN CURRENCIES FOR
TWO BASIC REASONS.
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8. COMPANIES DOING BUSINESS
INTERNATIONALLY NEED TO EXCHANGE
CURRENCIES IN ORDER TO MAKE AND
RECEIVE PAYMENT FOR GOODS AND
SERVICES.
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9. THESE FOLKS FOLLOW FUNDAMENTALS
AND USE FOREX TECHNICAL STRATEGIES
IN ORDER TO HEDGE THE RISK OF
CURRENCY FLUCTUATION BETWEEN THE
SIGNING OF A CONTRACT AND FINAL
PAYMENT.
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10. CURRENCY SPECULATORS SIMPLY SEEK TO
PROFIT FROM PRICE CHANGES BETWEEN
ANY GIVEN PAIR OF CURRENCIES.
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11. TO A DEGREE IT IS EASIER TO DEVELOP A
FOREX TRADING SYSTEM FOR HEDGING
CURRENCY RISK BECAUSE THE TRADER IS
ONLY INTERESTED IN ONE PAIR OF
CURRENCIES AND ONE SPECIFIC TIME
FRAME.
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12. ON THE OTHER HAND A CURRENCY
SPECULATOR WILL COMMONLY KEEP HIS
EYE ON A NUMBER OF CURRENCY PAIRS IN
ORDER TO TRADE THE MOST PROFITABLE
PAIR AT THE MOST PROFITABLE TIME.
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13. THUS A SPECULATOR WILL NEED TO ALLOT
TIME TO SEEKING THE MOST PROFITABLE
PAIRS TO TRADE AND MAY SUBSCRIBE TO
AN ALERT SERVICE IN ORDER TO TRADE
WHEN PRICE ACTION IS POTENTIALLY
MOST PROFITABLE.
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14. WHICH MARKET TO TRADE AND WHAT
TIME OF DAY
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15. THE MAJOR FOREX EXCHANGES ARE
LONDON, NEW YORK, AND TOKYO. THE
SUM TOTAL OF THEIR BUSINESS HOURS
ALLOWS A TRADER, IN THEORY, TO TRADE
AROUND THE CLOCK. HOWEVER, HUMANS
NEED SLEEP.
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16. TRADERS ALSO NEED PREP TIME TO
SCOUT OUT TRADING OPPORTUNITIES,
LEARN MORE ABOUT TRADING
STRATEGIES, REVIEW RESULTS, AND
MODIFY THEIR TRADING SYSTEM.
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17. IN ORDER TO DEVELOP A FOREX TRADING
SYSTEM THAT WORKS FOR PEOPLE, TIME
OF DAY, AVAILABLE HOURS AND
ORGANIZATION OF WORK FLOW ARE
CRUCIAL.
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18. FOLKS WISHING TO TRADE THE POST
TSUNAMI YEN VERSUS OTHER
CURRENCIES MAY WISH TO WORK DURING
TOKYO BUSINESS HOURS WHILE THOSE
TRADING THE BRITISH POUND MAY WISH
TO WORK LONDON BUSINESS HOURS.
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19. FOR A TRADER LIVING IN MIAMI, CHICAGO,
DENVER, OR SAN FRANCISCO THIS WILL
REQUIRE OTHER ARRANGEMENTS IN
ORDER FOR THE TRADER TO HAVE A
PERSONAL, SOCIAL, OR FAMILY LIFE.
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20. HOW MUCH DO YOU WANT TO RISK AND
HOW DO YOU PROTECT YOUR MONEY?
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21. TRADERS TYPICALLY TRADE USING A
MARGIN ACCOUNT.
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22. THEN THEY LEVERAGE THEIR TRADES
WHICH CAN GREATLY MAGNIFY PROFITS
BUT CAN ALSO MAGNIFY LOSSES.
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23. SMART TRADERS ALSO USE TRAILING
STOPS IN ORDER TO LOCK IN GAINS AND
AVOID DISASTROUS LOSSES.
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24. SMART DAY TRADERS GET OUT OF ALL OF
THEIR TRADES AT THE END OF THE
TRADING SESSION TO AVOID GETTING
CAUGHT IN A BIG GAP WHEN THE MARKET
OPENS THE NEXT DAY.
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25. SMART TRADERS NEVER PUT ALL OF THEIR
MONEY INTO ONE TRADE AND SMART
TRADERS NEVER LOOK UPON WHAT THEY
ARE DOING AS GAMBLING.
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26. AND GOOD TRADERS REVIEW THEIR
RESULTS WHETHER THEY ARE TRADING
THE EURO AND THE GREEK DEBT CRISIS
OR ARE KNOWLEDGEABLE ABOUT
COMMODITIES AND TRADING THE AUD,
AND IF THEIR SYSTEM DOES NOT WORK
THEY DEVELOP A FOREX TRADING SYSTEM
THAT DOES.
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27. FOR MORE INSIGHTS AND USEFUL
INFORMATION REGARDING THE FOREX
MARKETS AND FOREIGN CURRENCY
TRADING, VISIT
WWW.THEFOREXNITTYGRITTY.COM.
