Currently, it is believed that 90% of self directed traders lose their initial capital when they start trading forex. There are several factors that underpin this unwelcome statistic but one factor is that many novice traders lack knowledge of the skills required to be a successful trader. Without these skills, traders allow their emotion, excitement or fear to control their trading. The absence of a structured approach to capture profits on a consistent basis will result in a string of largely uncontrolled losses that reduces trading capital to zero.
We all possess cognitive biases and behaviours that affect our ability to make good judgement under conditions of uncertainty. If you rely solely on your own judgment during trading, you may find that you are fearful just when you should be bold and courageous when you should be cautious.
It takes time to learn how to trade forex successfully: you need to understand fundamental, technical and quantitative trading issues, money management, gain experience in varying market conditions and finally, develop a trading system you can believe in and implement its signals with total confidence.
A good trading system encompasses the entire process of trading: it provides answers for each of the decisions a trader must make while trading and makes it easier for a trader to trade consistently because there is a set of rules which define exactly what should be done for each trading opportunity. The confidence, consistency and discipline afforded by a thoroughly tested trading system are the key to many of the most profitable traders’ success. It is no coincidence that most successful traders use a “mechanical” trading system where every aspect of trading is covered and very little is left to the judgement of the trader.
Selecting a good trading system is difficult as publicised system performance is often the result of testing on historical data rather than live trading data. System developers naturally present their systems in the best possible light but no system is foolproof and delivers the same performance in all trading conditions. Some systems require a lot of manual adjustments or require you to read several manuals or watch hours of video whilst others are fully automatic and ready to use immediately. One of the best ways to decide on a trading system is to see it working in live markets through a free trial. That way you can see if the system is likely to deliver on its promised performance. Would you buy a car without a test drive?
