By Cedric Welsch
Every Forex system ever devised has several things in common. While systems may differ in the type and number of studies or indicators they use the basic rules for trading remain the same. A seasoned trader can sometimes make profitable trades following just the Forex news reports. But most investors must understand and follow the rules of disciplined trading. Take a look at the rules you see listed here, follow them as you develop your own trading style and remember that the best systems are the simple ones that you can understand and build for yourself.
First of all you must learn and understand how to read a chart and be able to determine long and short-term trends. By looking back in time on the charts you should be able to recognize seasonal or recurring trends and that knowledge should allow you to plan for history to repeat itself. Secondly, a set of tools is an important part of your trading arsenal. Whether you subscribe to a particular Forex system or follow the Forex reviews of a guru, you must remember that these are both tools and tools cannot make the trade, they are there to make the trading easier. Thirdly, do not overuse the leverage that is afforded you in this area of investing. New investors get themselves into trouble very quickly by taking advantage of this leverage.
The fourth thing you have to remember is to use easy to understand strategies. Always employ stop-loss tools offered by your broker. You must always plan your trade, knowing the exact entry point and exit point of every trade. And lastly, you must be confident, persistent and patient, successful currency trading takes time.
Now that the rules are out-of-the-way, here is a very simple yet successful Forex system, that when employed correctly is 70 – 80% effective. There are 4 indicators that you will follow: moving average, MACD, force index and Parabolic SAR. Trades are initiated only when these four signals are in agreement. These trades can be done on any time frame you choose but work most often on the 1 hour and 4 hour chart. Shorter time frames cause a lot of seesaw action and longer time frames require deeper pockets to absorb the small corrections.
When these 4 things occur you will go long or buy the currency pair you are watching:
1.The moving average is below the price and moving up
2.There has been an MACD crossover below the zero line
3.The force index is on the way up
4.The parabolic SAR is below the price
All 4 items must be in agreement or you do not trade.
With this Forex system you may also profit from a market that is trending down by observing these 4 rules:
1.The moving average is above the price and moving down
2.The MACD has a crossover above the zero line
3.The force index is on the way down.
4.The parabolic SAR is above the price.
Once again follow the rules and all 4 indicators must be in agreement before you open a trade.
While this Forex system is very effective it does have occasional losing trades. No system will ever take the place of educating yourself on the market. Follow the trends and watch the Forex news. Look for outside signals that will allow you to be confident in your trades. Follow the rules, trade confidently and you will learn to profit.
Some incomprehensible numbers and stats may arise as you hear forex news trading from different sources. The more heavy the gravity of a certain forex scam, the more you need to be aware of it too.