What are Your Trading System’s Goals?
Posted by Edward Dy on July 23rd, 2008
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Photo credit forexpaul2
What is every currency trader’s purpose in devising a forex trading system? You might be thinking of an answer that’s very obvious: to make billions of dollars. While no one will argue against having that kind of goal, it’s not going to help you become a successful forex of currency trader.
The reason why you’re creating a trading system is because you want to achieve a couple of very important goals:
- To detect trends as early as possible; and
- to protect you from whipsaws.
If with the aid of your trading system you were able to accomplish both things mentioned above, you will become a successful trader.
Photo Credit: pfala
What’s difficult about those above-mentioned goals is that they tend to contradict each other. If the main purpose of your trading system is to detect trends early, then you will most likely get a lot of false alarms.
On the other hand, if your system’s main purpose is to avoid whipsaws, then you will most certainly miss a lot of trading opportunities, since your system will be slow to react to trends.
When developing your system, what you need to is balance both of your goals – find a compromise. This way, you will be able to detect trends early, and at the same time you will be able to distinguish the fake from the real signals.
If your system is well balanced and configured as regards your trading goals, then your trading system will help you make a lot of money.
Happy trading!
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