How to Find a Forex Day Trading System that Works

If you are trying to make money in the markets, chances will dramatically improve by trading with a system. There are more than 300 trading systems available and only 10% of them are profitable. You have to find the day trading system that works for you. The purpose of this article is to present the viewpoints on how to find a forex day trading system that works.

First and most important, the day trading system should be easy to understand. It should have less than 10 rules. The rules should be easy to understand and carry out. Due to a fast paced market, you will not have time to calculate any complicated formulas to make trading decisions. An over-optimized system is less likely to produce profits in real markets than the simpler ones with fewer rules.

Electronic trading markets are better than non-electronic markets, because they provide lower commissions and provide instant fills. This is important so that you can strategize your exit. An exit order should never be placed until you know whether or not your entry order was filled. Electronic markets provide fill in less than a second, allowing you to place your exit orders immediately.

When you are trying to find a trading system, find one that produces a smooth equity curve. The net profit may be slightly smaller, but worth it. Experienced traders will tell you that it’s better to make frequent small profits than occasional large profits. This is very helpful if you trade for a living and have bills that need paid.  Thriving traders make steady profits!

When trading, it is important to find a healthy median between risk and reward. If you bet it all, the potential to make a profit is there if you are risking a lot, but you also risk ruining a lot. For a good day trading system, risk of ruin should be always less than 5%, and chance of success should be 5-10 times higher.

A trading system that produces frequent trades, at least five per week, is best. The more frequent the trades, the smaller the chance of losing will be. If a system only has one or two trades a month, then a lower percentage of losing only shows that one or two people took the brunt of the loss.

A good trading system should allow you to start small with only one or two contracts and then gradually increase as your account grows. Unlike, Martingale systems which require you to double your contracts every time you lose, allowing one winner to gain all of the money you previously lost. This would mean that you would need to have an account size of more than $60K in order to meet the margin requirement.

It is extremely important to determine entry and exit points at a fast and accurate rate to assure that you do not miss a trade or find yourself in a losing position. The best way to do this is to automate your trading. Search for a trading system that is or can be made automated. This prevents trading mistakes by human error or emotion and assures that you make profits according to plans.

As discussed before, trading strategy should show more than 50% winners. This will lessen the psychological pressure of trading and chances of losing both. As a beginner it will improve your confidence in your trading system if you experience a winning percentage of 65% or higher.

The system you choose should be tested on no less than 200 trades, showing a higher probably of future success.  The more trades there are in back testing, the smaller the margin of error will be. You should also make sure that the test period is valid as well.

By applying the principles in this article, you will be able to find a successful day trading system that works for you.

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