What is the best currency trading system? Out of all the current techniques in use, which is the most profitable and delivers those profits the most reliably? Is there even such a thing as a “best” system anyway? Let’s find out below.
Defining A Currency Trading System
Before we start comparing systems to see which are the best, we need to first define what it is exactly that we are looking for.
A system is a set of logical rule that form the basis for decision making.
Why the emphasis on logic in the first place? Because the number one reason why traders fail is because they become emotionally involved in their trading. They chase profits that don’t exist. They put more money on the line to try and make up for losses. It is very similar to the losing gambler’s mentality.
With a system, we have a bulletproof set of rules that must be obeyed. We know that if we disobey any then we might as well abandon the entire system. No system will guarantee that every trade of yours will be profitable. But a good system should have you winning in the long term.
So, What Is The Best System?
What does “best” mean anyway? What is “best” to one person may be “worst” for another.
Different people also have different risk profiles. Someone who likes to take higher than average risks in return for higher than average profits will dislike a system that is particularly cautious.
What is clear is that you cannot please everyone. However, what you can do is to define the general element of what makes the best currency trading system.
The Essentials Of The Best Currency Trading System
The best system will definitely include the following.
Low drawdown – a drawdown is basically a losing streak. No system is guaranteed to win all of the time. Generally, you will win most of the time. But a losing streak is always possible. The best systems are those that do not have a huge drawdown i.e. they have low drawdown.
Risk management – there is no need to take stupid risks when trading currencies and this applies just as much when you have a system that you are devising. The best systems do not put at stake more than 2% of your total balance with any single trade. While this may not sound like much, it is well know that risking more means risking an account “blowout”.
Good ratio of profit trades to loss trades – theoretically, a system can still be profitable even if you have more loss trades than profit trades, so long as the profits total outweighs the losses total. However, it is better to have many more profit trades than loss trades and the “best” system should possess this quality.
Net profit – this should be positive. How high should it be for the “best” currency system? This is a matter of debate. The higher it is, the higher your drawdown is also likely to be. If you are careful to monitor both when scrutinising a system then your own “best” system is likely to be a matter of personal choice that matches your own specific risk profile.