FOREX
Currency Systems – Four Tips to Pick a System that Makes Money
by Stephen Todd
FOREX
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With the many FOREX currency systems available,
you can in theory, simply turn your computer on and follow the signals
to generate automatic profits.
That’s the theory - but the fact is, there
are many FOREX currency systems sold that are obvious scams, and
the systems will never work.
This article aims to give you tips on picking
systems that can make money, and avoid the scams.
There are two main reasons why most FOREX currency
trading systems fail to live up to their Hype:
1. Black Box Systems
These are systems where the logic is not revealed
to the buyer - and for a FOREX currency trading system to be used
successfully, the trader must have confidence in it.
If you don’t know the logic of the system,
you will not have the confidence to follow it when a losing period
occurs.
You need to follow a system rigidly to make money
- otherwise you may as well not have a system in the first place.
Using a FOREX Currency trading system is all
about having the discipline to follow the system - and if you don’t
have confidence in the logic, you will never do this.
2. Curve Fitting and Optimization
Another indication of a currency trading system
that is a scam, is one that involves curve fitting, or optimization.
These systems give a fantastic performance in
back testing - because of the tweaking of the system rules, to make
them fit the data, and produce profits.
A trader once likened this to shooting holes
in a barn door, and then drawing circles around every hole - to
make each shot look like a bull’s-eye.
Let’s face it, we would all be millionaires,
if we had tomorrow’s news today - but we don’t.
Avoid any system that offers unique rules, or
many variations for trading different markets.
If the system is based on solid logic - it should
work on ANY trending market, and should not be optimized, or curve
fitted to an individual market.
You will never see a hypothetical performance
that fails!
Most unscrupulous vendors achieve great performance
by making the system fit the data - and this causes the system to
fail in real time trading.
Here are four tips, to help you separate out
the scams, from the good FOREX currency-trading systems:
1. The Rules and Logic are Fully Explained
You will then have confidence in the system when
it suffers a string of consecutive losses.
2. Some Evidence of a Real Time Track Record
Has the system has made money in the real world
of trading?
This is the acid test of a system. If there is
not a real record, look for a hypothetical audit done in real time
- many systems do this before launching, and this gives a good indication
of how the system will perform.
3. Look for Simple Systems
There is absolutely no correlation between how
complicated a system is, and its profit potential. In fact, simple
systems tend to work best, and will tend to be more robust in the
brutal world of trading.
Most of the top FOREX currencies trading systems
are based on simple logic.
4. Avoid any Optimized System
As already mentioned, if the system has sound
principles, and then it should work on a broad spectrum of financial
instruments - avoid any system that optimizes individual markets.
Not all FOREX currency trading systems fail -
but if you want to get one that works, be realistic and do your
homework first.
Building Your Own System
Most traders like the concept of FOREX currency
trading systems, but like to have some input to customize the system
to their specific personality. If the system offers some human input,
it is easier to implement the trading system with rigid discipline
- which is the key to building consistent profits.
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