Be Cautious of Forex Trading Systems
By [http://ezinearticles.com/?expert=Michael_Russell]Michael Russell

A forex trading system is a set of rules to follow, calculations to make, decision guidelines and other instructions to create and, supposedly profit from, your forex trading portfolio. They usually feature a process of minimal effort and consistent profits. Be warned, although you CAN find good systems out there for sale, 95 percent of them don’t work.

The reason they don’t work is not always because the author didn’t know his business or was a scam artist. The strategy may very well have worked once. But once many people know a strategy, it ceases to be effective in the forex market.

There are two primary methods of forex trading – swing trades and day trades. Most experts will advise you to stay away from day trading. The volatility within a day is mostly random and can’t be predicted. Therefore if you spend your money on a day trading system, you’ll probably end up with an empty account - especially if you’re a novice. Even with a swing trading system, there are certain precautions it is wise to take.

For example, always ask for a real time track record. This shows the success or failure of their system as consistently and accurately applied to a portfolio(s) over time. If they, instead, give you a hypothetical track record, ignore it and ask again for the real time track record. The hypothetical track record is a sales gimmick that shows the results that could have been achieved over a certain period. But it was prepared after the fact, knowing what both the buy and sell prices were and picking these entrance and exit points from past known data. This is useless to you. Hindsight is, after all, 20-20. I’ll bet you could have this kind of success after the fact, too!

The fact is, many systems can’t give you a real time track record, because they don’t have one. Ask yourself, do you really want to buy a system that the creator doesn’t use himself? If he/she doesn’t trade it, why should you? If they do give you one, you’d like to see at least two years, it should be audited documentation and the fees should be disclosed or, preferably, for the results to be expressed net of fees.

Look for the biggest peak to valley drop in the real time track record. Be honest with yourself as to whether you would throw in the towel if it had happened to you. Know that many systems can create great gains over time, but their short-term volatility can be discouraging. If you can’t tolerate a 50% draw down, you probably aren’t ready for this kind of risk.

Make sure you understand the forex trading system’s logic. If you don’t completely understand this, chances are you’ll lose interest and not work the system as required when you run into a period of losses, which all traders and all systems do. From knowledge of the logic comes confidence. With confidence is discipline.

Check out the system’s guarantees and support. If you’re having trouble understanding something or need further advice, are they there for you? Try asking the vendor a question about the system? Did he/she get back to you with a reasonable response? What if you try the forex trading system for a short time and decide it’s not for you? Is there a money back guarantee for the cost of the system? How long does it run? All these things should influence your buying decision.

Pick through the advertising copy and get the facts about any forex trading system. Don’t forget the key decider – the real time track record. Do your homework and find a real forex trading system that delivers the profits it promises.

Michael Russell

Your Independent guide to [http://forex-trading-guided.com/]Forex Trading

Article Source: http://EzineArticles.com/?expert=Michael_Russell http://EzineArticles.com/?Be-Cautious-of-Forex-Trading-Systems&id=615496

If you're a beginner at forex trading, you may be best off with a system to follow while you're learning. Learn how to avoid the majority that just don't work and find the jewels.