Trading Forex: Trading in the Forex market has become very popular in recent years. One of the most frequently asked questions is how difficult is it to achieve success in this great sector? Or, put another way, how many operators get consistent results in the Forex market? Unfortunately few manage to achieve this goal, only 5% of traders get it. One of the main reasons for this is that many traders take as many correct wrong information and operate forgetting the most important factor: the price action.
Most trading systems are based on technical indicators (such as moving averages crossover, values hipercompra / hiperventa, etc.) But what are technical indicators? They are not just points on a graph, as derived from mathematical formulas applied to a particular currency pair.
There is an important implication given this definition of technical indicators, namely, the fact that the readings obtained from them are based on price action. Consider a crossover signal the price rises high enough to cross the moving average value of the short period with the long period, creating a long-term signal, ie indicating the possibility of opening a buy position. Many traders interpret this signal as if the crossover moving average, once reached such a point, raises the price. What is never considered is that the crossover took place precisely because the price went up. Therefore the price behavior could be different from that provided by operators. For this reason we must make the decision calmly and evaluating such factors.
Trading decisions taken on the basis of technical indicators, without also considering price action, can give very different results and not so good from those expected. For example, again a long-term signal generated by a moving average crossover as the market approaches an important resistance level. If the price suddenly starts to recover from this important level, there is no reason to receive this signal. For this reason it is always advisable never to use a single technical indicator, but a combination of two or three indicators that can confirm our hypothesis.
Technical indicators are obviously very important in trading. But when the time comes to take the trigger and open a position arrives, also consider the domestic price of our trading system will give us a much better chance of making money.
So, how can we create a perfect trading system?
Mainly, we ensure that our system fits our personality; otherwise it will be difficult to follow. Each trader is different from another, therefore a system that can be adapted for one, can not be other. Remember that it is important to seek own trading style in order to find one that works for us, then be sure to know the technical nature of the indicator used.
Secondly, we must integrate the price action in our system operations. Thus we can foresee long-term signals, which is an absolutely important aspect if we want to understand in the future, how could move the trend and therefore can open new positions.
Finally, we must be absolutely disciplined in following our trading system, with absolute rigor. First of all we need to try a demo account our trading system, to be safe and not risk it work any way the loss of money.