The Best Forex Trading System

In this article I will going to talk about how to create the best Forex trading system, and how to trade it and gets consistent profits. As we knew, if we want to get consistent profits we need the best trading system to use it over and over again. So, what is Forex trading system anyway? A trading system is a trading method that contains technical or fundamental where can leads us trading in any market situation and to makes profit absolutely. If you type and look in Google search about "Forex trading system" or "best Forex trading system" you will find so many search results. Most of them over perfect trading systems and can give you hundred of pips per month! in the Forex world Forex trading system like this called "Holly Grail". A system which can makes profits in any market situation.

Interesting right? A Forex trading system which can gives profits hundreds of pips per month and become gold mine for you forever! Some of these trading system are sell expensively. You must be careful with products like that, because most of them are scam!

Let say that trading systems are good, then the difficult thing in a Forex trading system is not how to create a trading system but how to follow the system with discipline. It is not easy job for instance if the system needs us to trade between 00.00 - 03.00 every day, can you? wake in the middle of the night every day to find opportunities for our trading system that we bought. Or another methods that you should follow like initial margin, strategy trading such swing trading system, day trading or scalping trading system and etc.

The good news is we can make own Forex trading system! And we can make a trading system suitable with our characteristic. Better right? This article will help you for that. Actually make a good Forex trading system is easy but not so easy as well. Especially when we want to back test and forward test it. We do a back test if we want to know our trading system can makes profit with the previous price movement data. Forward test means we use the trading system in our demo account with the actual market movements.

Let's learn one by one how to create the best Forex trading system.

Step 1. Decide our trading objectives
Our objective should be realistic, clear and compatible with our condition. For example our target is $10.000 per year. Determining our profit target should be relevant with our margin. So, how to determine our target in Forex trading?
- Do not over target, for example we set our target 10% per month. This would be enough, if we can achieve 10% per month, it will be 120% per year! Just remember about risk and reward ratio in money management trading. This must be considered every time we get in the market, we have to calculate our risk and our profit target because trading in the market is not always 100% profit. Every time we want open a trading position we must determine risk and reward, let's say we set our stop loss 30 pips, then we should set our target profit at least 60 pips per trade (1:2 risk and reward ratio).

Step 2. Determine trading method
At this step, we will talk about how to determine our trading method. Are you scalper or day trader or swing trader? This method is very important because we have to pick our characteristic and what time frame to use for trading. For example, if we have profit target 200 pips per week or per month, we have to choose first what method for trading. Trading method like swing, day trade, or scalp trade. If we are a swing trader we can not open a trading position everyday, because swing trader aims big market movements. If we a day trader we can open a trading position every day and if we a scalper we can open many trading positions everyday.

Usually a trader use 2 time frame charts in his trading platform. First trading chart is use to determine trend direction in the market and usually we use bigger time frame. And the second trading chart is use to identify the entry level in the market and usually we use smaller time frame chart to identify the entry levels.

Swing traders usually use monthly or weekly trading chart to identify the market trend and use 1 day time frame chart to determine the entry levels.
Day traders usually use weekly or daily trading chart to determine the market trend and use 4 hour time frame chart to identify the entry levels.
Scalpers usually use 30 minutes or 15 minutes trading chart to identify the market trend and use 1 minute or 5 minutes trading chart to determine the entry levels.

Step 3. Choosing trading tools indicator technical and fundamental.
Talking about creating Forex trading system, we should understand how to make technical and fundamental analysis. At least you use indicator technical and fundamental to predict:
1. Identify the current trend in the Forex market accurately
2. Find the right time to open a trading position
First we have to choose forex technical indicators. To determine the trend direction in the market we need bigger time frame chart and trend indicator to measure or recognize the trend direction. We need smaller time frame chart to identify the entry levels, because it is more effective. If we want to identify the trend direction in the market Forex we need 2 kinds of technical indicators. One indicator is used to identify the trend direction of the market price and the other Forex technical indicator is used indicator to determine the overbought and oversold areas.
We use trend Forex trading indicator to identify the trend direction of the market price and we use oscillator Forex trading indicator to identify the overbought and oversold areas in the market.

In this trading example, we use Exponential Moving Average indicators 5 EMA and 10 EMA indicator trading and we use Stochastic oscillator indicator to identify the overbought and oversold area. Now we find technical indicators for determine entry level trading. The indicators for determine entry trading levels is not different for our indicator for identify the trend direction, but the rules is different. To identifying entry trading levels we use smaller time frame chart such 15 or 30 minutes, we still use Exponential moving average and stochastic Forex technical indicator, but we add another Forex technical indicator - William's %R Forex indicator with 14 period. William's percent range technical indicator is used as supporting indicator. We set William's %R with 50-50, so William's percent range will give bullish trading signal if this indicator moves above 50 or this indicator will give bearish trading signal if this indicator trades below 50 level.

So how we determine the entry levels? First, we need to know trend direction bullish or bearish from the bigger time frame chart analysis. For instance, if the bigger time frame give bearish signal then we only look sell trading and if the bigger time frame give bullish signal then we only look buy trading.

We can open a trading position if all indicators (Exponential moving average, stochastic and William percent range Forex technical indicator) give the same trading signal.

Ok, how about fundamental analysis.
There are several rules in Fundamental anaysis
1. Do not open a trading position before fundamental news release
2. Do not open a trading position when fundamental news release
3. Do not open a trading position after fundamental news released
These because when there is a fundamental news, Forex trading market usually moves because of emotion of the market and it is hard to predict using Forex technical trading.

Step 4. Deciding risk and reward ratio
We can set 1:2 risk and reward ratio

Step 5. Do back tests.
It's better if do back test and forward test on our Forex trading system. And you can try forward test using demo account at least three months. This step is to make sure your trading system is accurate enough to collect the mpney in Forex trading .

Step 6. Follow and obey your trading system
The last step and the hardest thing we should do is to follow and obey your trading system. You have to keep the discipline because this step it the most important thing that should do.

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