This is a Forex Guest Post provided by Mike Portman:
There are many Forex systems available out there. Some are free, others are paid. Some might work well, others not so much. So, how can you choose the right Forex system for you?
There are a number of questions you need to ask yourself before start looking. We are all different as traders and as individuals. We all have our own preferences, our own goals, our own time we can devote to Forex trading and our risk profile. Here are the questions you need to answer that will help you find the right Forex system for you:
1. Are you the kind of person that gets anxious and stressed out when the deadline is near or do you work better under pressure?
Answering this question will allow you to know if you prefer shorter term strategies or longer term ones. If you like the pressure and feel this is when you work best, then day trading or scalping may be a good choice for you. On the other hand, if you feel anxious and stressed out when you have a deadline that is coming, you might think about swing trading or position trading. With these strategies, you’ll have more time to check the trades, the reasons to enter and to exit, etc.
2. How much time can you devote to Forex trading?
Remember that this time involves not only the trading part; it also involves the time you need to learn. And this is not just at the beginning. You’ll need to keep learning, in order to develop your trading skills. Even by looking at your trading journal and analyzing the good trades and the bad ones will allow you to evolve as a trader. This will lead you to make more good trades and less bad trades, since you’ll be learning from your own mistakes.
You need to be completely honest here, or there is no point in answering this questions.
3. Are you a risk taker or like to avoid risk at all costs?
Whatever your answer to this question is, it’s important to refer that you need to have a risk management strategy. A risk management strategy main goal is to protect your account. And this should also be the first goal in your mind. You can open your trading account with $200 or with $20,000, and you still need to protect it since you’re trading with your hard-earned money. Or else, you might as well going to the casino.
Within your risk management strategy, you should only trade a very little percentage in every trade you make. Some advocate that you shouldn’t risk more than 3 to 5% of your entire trading account in each trade. This percentage obviously depend on your trading account amount and you should use your good sense to determine it.
As you probably know, leverage is a great advantage of trading Forex. But it can also become a great disadvantage if you don’t use it correctly. When using leverage (if you decide to use it), you need to understand that your wins will be higher, but your losses will be higher as well. If you use too much leverage, you may be taking the risk of not achieving your first goal — to protect your account. Yes, you can use it leverage, but use it wisely.
4. What do you expect from Forex trading?
Are you expecting to make an extra income? To become a full-time trader?
You should have your main goals well defined. If you don’t have an ultimate goal, you’ll just be gambling. As I stated earlier, your first goal should always be to protect your account. Then, decide what your goals are and what you need to achieve them.
When trading Forex, there is no “Holy Grail”. You just can’t expect to learn it all and be rich overnight. It just isn’t possible. There’s not a perfect system or strategy; you can find the right one for you, by answering all the questions posted above. This will guarantee that you’re suing a system that fits your trading personality, risk tolerance, time available and goals you have. So, ultimately, there is a perfect system for you. But in order to make it work and to achieve your goals, you need to work on it, spend time turning it better, learning to improve your trading skills.
About the author: Mike Portman is a veteran trader. He trades stocks, options and Forex, and he’s a co-founder of ProfitFeed.net.