Choosing A Day Trading System
Everyone that aspires to trade in the markets should select a consistent trading system. Below are the principles for examining a trading system. How many of these principles do you adopt with your current approach?
* To corroborate a trading system you need a minimum of 50 trades in the test. You should also have at least 75 ticks (overall market trades) in a bar to have a sound charting approach.
* Calculate your average profit per trade, the average loss. The percentage of your all wins and losses.
Chances are, if you're interested in making an additional income stream through trading, you've come across automatic Forex trading systems. Most of the best Forex trading systems are programmed as Metatrader 4 expert advisors, and there are many free and paid Metatrader expert advisors on the market.
So do any of these automatic Forex trading systems actually work? By the end of this article, you will be able to quickly differentiate between the Metatrader 4 expert advisors that actually deliver a safe and consistent monthly profit, and the Metatrader expert advisors that will crash and burn your account in a blink of an eye.
Automatic Forex trading systems are ideal for traders who want to achieve a safe and consistent monthly profit without being chained to their trading desk. Let's face it, most people get into trading to achieve financial independence and freedom, so why would you want to learn trading from scratch? The best Forex trading systems are those that free you from the need to go through the painful and expensive learning curve most amateur traders start out with.
That's where the Metatrader 4 platform comes in. Metatrader is a popular trading platform because it allows traders to develop and run Forex expert advisors, which are basically a pre-programmed set of rules for buying and selling when certain conditions are met. These Metatrader 4 expert advisors are really powerful because it puts your entire trading operation on autopilot, with no previous trading experience necessary.
So how do you differentiate between Metatrader expert advisors that work and those that hazardous to your trading account? First of all, forget about trading any free Metatrader 4 expert advisors. Chances are, they will end up costing you much more than you would have saved in buying any one of the commercial Metatrader expert advisors on the...
* The biggest winning trade shouldn't surpass 50% of the net profit. Otherwise the random lucky trade factor will throw off your system results.
* What's the Expectancy Ratio of your method? If it doesn't surpass 2 to 1 with a 50% but makes money, can you psychologically trade it and except all the losses necessary to stick with the system?
* As Van K. Tharp, Mark Douglas, Bill Williams. Bent Steenbarger the Market Wizards all say, you trade your beliefs about the market. What does your trading system expose about your trading mentality? Does your system lead to doubt or confidence?
* Compare your trading system to other types of investments. Which system has the best Internal Rate of Return with the least risk? At minimum you need at least four times the return of a low risk investment (T-Bills) to make your system worth trading.
What's the best approach to build a solid trading system? Just like you build anything else. You first start with a goal. Apply the principles to reach the end result. Then you create a plan to achieve that goal, which includes all the risks, rewards, terms and conditions necessary to reach your goal.
The missing element is often the next step: execute the plan, closely observe your results. Make necessary modifications or changes to the system. The last step is to observe your emotions to see if you can accurately trade these signals. Play the probabilities for gains versus losses as you've laid out your system.
Mental control is the biggest challenge of any trading system. Have a plan. Trade your plan. This is the best path to achieve your goals.