There are so many forex day trading systems that it can be very hard for a trader to find the best one. In fact when you think about all of the variations that you could have on all of the possible technical analysis tools, there must be an infinite number of possible systems.
Of course, if there was one best system that topped them all and worked for everybody with guaranteed profits, we would all be using it. But this is actually impossible. Every time somebody makes money in the forex market, somebody else has to lose.
Sure, some of the slack is taken by people who are exchanging currency because they actually need it for import and export, travel or investments. However, the huge majority of the currency exchanged every day belongs to traders. So if everybody in forex trading used the same system, it wouldn’t work any more.
So we should celebrate the diversity of forex day trading systems in the same way that we celebrate biological diversity, and just go look for one that will work for us. How do we know that? We can ask ourselves these three questions:
1. Is It Simple To Understand?
The best day trading systems are usually simple. Forex day traders need to act fast to maximize their profits so you do not want to be having to look at a million different indicators before you can open a trade. Checking 2-3 indicators in two time frames is plenty.
2. Does It Have A Lot Of Winning Trades?
Most people work best with systems that have a relatively high number of winning trades. The reason for this is purely psychological.
Imagine that System A has 70% winning trades, making 30 pips profit on the wins and losing 40 pips on the losses. System B has 40% winning trades, 70 pips up on the wins and 30 pips down on the losses.
System B will make slightly more profit in the long term, but it will often have runs of many losses in a row. This can be very hard to handle psychologically and could result in the trader losing faith in the system and quitting when he was down. Therefore, most new traders would do better with system A.
On the other hand it can also be hard to cope with systems that have large single losses. Another system that has 85% winning trades, making 20 pips profit on the wins and losing 60 pips on the bad trades, would also make a profit in the long term but just a couple of those 60 pip losses in a row could lead to high stress and bad decision making.
3. Does It Fit My Trading Style?
Forex traders looking for day trading systems have different requirements than longer term traders. You will need to consider what times you are able to be online and trading.
If you only have a small window of time when you can trade, you may need a system that works well for a particular currency pair that is active at that time. There could be many factors like this to take into account when considering forex day trading systems, depending on your situation.
