Are you considering using automated forex trading system? Well this article will help you know what automated forex trading software or systems are, their advantages and how to choose the best.

Let me start by saying there is lot of money to be made in the forex trading market. However, in order to avoid loses like most forex traders, you need proper junction of resources (time, good trading strategy,startup capital and a good platform) and learn how to trade without getting emotional or simply put, avoid greed.

How can you avoid greed?

As a matter of fact, the absolute best way to avoid greed in the currency trading market is by using a good automated forex trading system or software.

Automated Forex Trading System? What Is It:

automated forex trading software are software programs or robots that have been designed to make trades on your behalf. They work the with common MetaTrader4 platform and after set up, it will make profitable trades for you, with no intervention by you. Sounds too good to be true? The fact is that it isn’t. These type of trading programs are now a reality and many forex traders are using them to make profitable trades.

Advantages of Using Automated forex trading system

Using an automated currency trading software or system forces you place trades based on certain concrete rules. This helps you deal with the emotional aspect of trading in the currency market. The mind is very complicated and it is very easy to believe things that aren’t real just because of money. As a forex trader, there are times your mind will tell you or give you reasons to enter a trade or exit a trade to cut loses and many times you will get hooked up, especially when the volatility is very high. You see how quick the prices are moving and you want to join the race in order to make some good “profit” without any clear entry or exit signals. Or just when you think the price is way to high, it simply can not go up any further, but just then it keeps moving up. All these will be eliminated with a good Automated forex trading system.

How To Choose A Good Automated forex trading software

Make sure the software or system you choose has the ability to analyze the market at all time. You can read reviews about the trading system online. You should always look for facts and not opinions. You would want to know exactly what you can and can not do with the automated forex trading system you choose. Also check out for the history of the trading system. An automated forex trading program that has not done anything good in the past has little or no chance of improving in the future.

Choose A Friendly Trading System: With the overview of the market, it can be extremely difficult to understand. You have to make sure you choose a trading system that is easy to understand and set up. If you are a new forex trader who wants to start with automated forex trading systems, then you have to choose a program that is very user-friendly.

Find a system with small rates of slippage. Slippage is when a system loses money before it starts to gain. Too much slippage can wipe out your account.

Choose a program that allows you to demo trade. I will advise you to use currency trading systems as they can do wonders or you, but I will not advise you to start using a trading system with real cash. The best way to test is to use a demo or practice account. You can open a demo account with any online broker for free and let the program operate from there safely where you can gauge its performance close up.

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A trading system is a methodology of trading. An investor who uses one system and follows a specific set of guidelines when making a decision, follows system trading, and will usually never deviate. A trading system is only one method of trading, and usual requires no thinking. It is possible to have one system that is governed by multiple system.

For example, to have 10 different systems, and select only one stock from each system every month according to the main system’s qualifications.

Someone that uses several Trading Systems is a multiple system trader. They have to either have an overall system that encompasses all of them, or make their own decision on which to follow. Doing so can be dangerous, as the purpose of system is to prevent human error. It is advised to be a system trader who trades one system at a time, or trade multiple systems within a larger core system, and avoid being a multiple systems trader.

Trading System – Trading can be awfully hectic without some kind of methodology. You can’t expect to take on the best traders in the world who have teams and resources at their disposal just by throwing around money at will hoping that it works. You need an actually defined system in order to be able to trade effectively.

Many successful systems are based on earnings and high potential for growth. Stockbee’s trading system often swings for the fences. As a result, it requires a solid degree of protection. Obviously you shouldn’t limit yourself to someone else’s system, you need to find one that is right for you.

There are two kinds of traders, technical traders, and fundamental traders, each has their own system. Of course there are some who use both.

Technical traders

Some system traders, are day traders. Others are swing traders. Still other people are more of a trend trader. Each will have it’s unique system. The system will be based on the technicals. Is it volume that triggers the buy? Is it price movement? A combination of both? Or perhaps it’s pattern trading.

Some people even have trading machines or robots that do the work for them. Others rely on pattern recognition done by a system. The method is to sign up for email alerts, or some form of alerts, then make a purchase based on the software’s recommendation.
There are some people that screen down a stock based on strong fundamentals, and only trade those stocks, but trade them based on the technical chart patterns and volume.

They will sell based on a trend break, or rules on when to take gains such as 20% gain according to their system. They will set a stop loss based on their system as well. It might be 4%, or 8%, or it may be a trailing stop.

Fundamental traders

Fundamental traders might do things a little differently. They are looking for improving fundamentals, or stocks that pass through a certain screener. Zacks.com is a great resource if you want to rely on fundamentals. Earnings is always a big part of a system, and the Zacks’ ranking uses earnings revision to get in early when the earnings and company internals appear to be improving. Zacks’ has several screens, and their software allows you to screen stocks according to many different options.

Regardless of your trading system, one thing remains important in every single system. Money Management and loss protection.

It doesn’t matter what the upside is or win rate is, if you can’t protect yourself from major declines, you shouldn’t be trading. I don’t care if your system is 90% effective (no system is and if they say they are, they’re lying), and if the gain is 1,000%. If you put all your money on it repeatedly, eventually you will suffer a loss so catastrophic you will never be able to recover without borrowing money. By taking one loss, you hinder your ability to make money. That is more costly then the potential for greater gains that you would gain by taking additional risk.

Just to illustrate if your system causes you to take a 95% loss, you need a 2000% return just to make up for that loss. You cannot trade like this. No system is better then it’s weakest link. That weak link unfortunately for many people is the ability to manage money. Fortunately, it is a skill that can be learned, and doing so will make you a better trader. Better yet, if you do not wish to be a better trader, you can simply follow the rules of a system that contains a methodology on how to manage money and how much to invest before placing a trade.

I recommend that you either have a trailing stop or a hard stop. You can also buy a protective put if you are afraid of a stock bottoming out overnight and plummeting through the stop. Protective puts are like owning insurance. Unfortunately, you have to continue to buy the insurance as it eventually expires if you don’t use it. Don’t trade options without learning everything about them.

Some puts are not good for some strategies. Longer term trades and Investments will require long-term equity anticipation securities, or LEAPs, where as you may not need to risk as much capital for short term protective puts. A trailing stop should be usually 20%, where a hard stop should be more like 7%. Different systems will require different stops so take this with a grain of salt.

A good investor or trader actually will rarely need to ever be fully invested. There are people that trade on complete margin for a few times the entire year, and the rest of the year they’re on the sideline, but generally the best traders that have a career that lasts have lots of money on the side, even more so if they use options and are unhedged. If you are unhedged, that is only playing one side of the market, (all buys, or only playing one theme such as only playing inflation or only playing deflation), you need to have even more cash on the side.

You have probably seen it before. You pick up a glossy brochure or saw an impressive newspaper advertisement claiming an accurate trading system that gives a success rate exceeding 80% or even 90%. Sounds attractive, doesn’t it? What if it is true? Imagine how much money you can generate if you are able to consistently pick the “right” trades in the markets.

Here lies the truth about such claims and contrary to the earlier assumption, that “highly accurate” trading system can lose you money instead!

Everyone is always searching for that “holy grail”, the one system that does it all. That perfect system that will help you pick a stock at the lowest price before it shoots up and help you exit at the highest price to maximize your profits. The system that will consistently help you pick the top of the tops and bottom of the bottoms. The truth is that if anyone is telling you or selling you this, you will do well to heed that instinctive “warning bells” that goes off in your head.

In fact, the more accurate your trading system, the lesser your chance of being profitable! How is this so?

Firstly, we have to realize what it means to have an “accurate” trading system. To make this claim such as 80-90% accurate means that the trading system has to be right 80-90% of the time. Is this possible? Sure, it is possible but to be right so frequently means that the average you can make from each of the winning trade will normally be low to keep that ratio high. Traders will be encouraged to take quick profits before it disappears.

Here is an illustration.

Say you have a trading system, Trading System T, that has 80% winning trades, where the average winning trades is $100, and 20% losing trades, where the average losing trades is $1000.

Expectancy, a statistical concept, tells us how much a trader can expect to make on the average of each trade. Expectancy is defined by the formula :

Expectancy = (% of Wins x Average Win Size) minus

(% of Losses x Average Loss Size)

Therefore in our example,

Expectancy of the Trading System T = (0.8 x $100) – (0.2 x $1000) = -$120

The expectation is actually negative. That means a trading system that is right 80 percent of the time can lose you money.

On the other hands, a trading system that has a positive expectancy could lose 80% of the time and still be profitable. Let’s call it Trading System S. Using the same numbers:

Expectancy of Trading System S = (0.2 x $1000) – (0.8 x $100) = $120

The above examples show how and why the desire to be right kills many traders. We are conditioned by our culture and environment to be right. Our society does not reward being wrong.

Trader with an inflated ego will always want to be right and thus will try all means to avoid losses. He tends not to take small losses and those small losses turn into big losses which he is eventually forced to take. Most traders and investors focus mainly on accuracy or reliability of a trading system to the exclusion of other considerations. It is no wonder that most inexperienced traders and investors lose money.

The obsession with a high-probability system sabotages a trader in a few ways. First, wanting to be right causes the trader to be less flexible when market condition changes. Second, it further reinforces the bad habit of not taking small losses when the trade goes against him. Ego plays no part in the market. Third, a high-probability system gives traders a false sense of security that his trades are doing just fine., which in fact may warrant him to take remedial action.

Being right and making money are not the same thing. People have a bias wanting to be right. As a result they tend to gravitate towards a high-probability trading system. Such trading system typically encourages traders to take quick profit in order to achieve high accuracy. This is done at the expense of profitability, which leads to negative expectancy.

The focus of a successful trading system should be on expectancy. With a positive expectancy trading system and coupled with good money management and proper position sizing, traders will at least stand a chance to beat the market. Successful traders are successful not because they predict the prices well but because the size of their profitable trades far exceed the size of their losses.

The next time, someone tells you that his system is 80 or even 90% accurate, be very wary, the system will likely to lose you money! Let me end by quoting George Soros, one of the best traders of our times :

“It’s not whether you’re right or wrong that’s important, but how much money you make when you are right and how much you lose when you are wrong”

This the crux of making money in the financial markets.

All Forex traders are looking for a profitable Forex trading system. We want something we can follow with predictable results. And as no system can be 100% accurate…we want a trading system that is profitable…one that makes it worth our time trading. But once we find a Forex Trading System that works… we tend to stop looking for ways to make it even more profitable. I understand the hesitation…making changes could cost you winning trades and money. So, once the profitable system is found, traders trade that system without wondering if the system could be improved. While coming up with a winning trading system is no small feat, how do you know you are trading the most profitable way? You don’t, unless you test! The purpose of this article is to give you three things to look at that could make your trading more profitable.

Look At Your Forex Trading System Stop Loss You should always trade with a Stop Loss. If the market changes direction, you need a safety net to keep the losses in control. But a tight Stop Loss that keeps your potential loss really low might be keeping your from a higher percentage of winning trades. The trick is to find the “sweet spot” when placing your Stop Loss. Pay attention to the currency pair you are trading as well as the Chart (M15, H1, D1, etc), you are trading. Then you need to test different Stop Loss ranges to look for the one that lets the trade develop without stopping you out of the trade prematurely, but that also limits risk. Again, the only real way to find this “sweet spot” is to test. Look At Your Forex Trading System Take Profit The way you decide to EXIT the trade is just as important as entering and managing the trade.

If you want a high win rate, you can set your Take Profit close to the entry level… but that is not the most profitable way to trade. Again, there will be a “sweet spot” according to the currency pair and chart time. Imagine if you can get an extra 10 pips of profit for each winning trade without reducing your winning trade percentage. Just think of how much MORE money you make with the SAME trades. While your take profit targets should be reasonable, don’t leave money on the table. Look At Your Forex Trading Systems Money Management Even a trading method with a high winning percentage can lose you money if you don’t know how to manage your money. And really, your money management should be based on your Stop Loss, Take Profit targets and risk tolerance.

First, you need to figure out how much of your account balance you’ll risk on each trade. Then you need to determine a LOT size that fits with your stop loss and take profit strategy. Once you have a trading system that hits the “sweet spots” with a solid money management plan, you can rest assured you are getting the most out of every winning trade…and controlling your loses. But if there is one thing you should take away from this article it is that just because your system may be profitable…it does not mean it can’t be improved! And each little improvement means a lot more money for you.

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I have often said that I could give everyone my trading systems and it would do them no good.

Let me give you an example, I can show you a trading system that picks the direction of the market correctly 60% of the time. On winning trades that system shows a profit twice as large as the average losing trade. Now in anybody’s book that is a great system.

But wait, there’s more… That system gives traders an average of 13 trades a day. Again on average the system produces between $800 and $1000 (net after all costs) each week off a single contract.

WOW! That’s a great system!

I can hear you say “Gimme, Gimme, and Gimme!” Who wouldn’t?

Let me tell a couple of other things about the winning trading system. The system can produce a run of 7 losing trades in a row in any given month. Now let’s deal with this, that is 7 losing trades in a row, how do you think you are going to feel after 7 losing trades in a row?

It’s hard to take the next trade after 3 losing trades but this is systems trading, you must take every trade! If you don’t take all trades you will not be in line for the run of 10 winning trades; which also happens once a month. It is hard to keep trading during a run of losses and after each successive losing trade it gets harder.

One of the comforts of this trading system is that the losing trades are small and it is important to understand that keeping losing trades to a bare minimum is the most important step in becoming a profitable trader. When designing trading systems I always seek to limit the average losing trade over a large number of trades. If we can set a limit on the size of losing trades we don’t have to worry about losing trades anymore. We know what size our losing trade is going to be in advance so if our trade turns into a loser it will never be an unexpected amount. Certainty of return as determined by these rules helps to create confidence in the trader.

It helps to have a broad vision of time and activity. Smart traders know that they are not going to lose all their money in one trade, nor are they going to make a retirement fortune on one trade. It helps to think of the next trade as the first one of the next one-hundred trades.

Going back to our trading system, that system will produce an average of 13 trades a day or 65 trades a week. As the system picks the market direction correctly 60% of the time that is about 8 winning trades a day or 40 winning trades a week. Unfortunately they don’t all come at the same time. It also means that on average 5 losing trades a day or 25 losing trades a week.

Traders must understand that no matter how hard you try you cannot tell which trades are going to be winners before you take the trade. Trading is about taking a position and then managing your risk.

Taking a position means buy or selling according to your signal, if you buy into a market you expect the market to rise and if you sell into a market you expect the market to fall, pretty simple really. Opening a position is the easy part. Exiting a position is a little more complicated not that we worry about a trade turning bad because if it does we get out very quickly. It is the profit-taking that complicates matters. The question is always “Where will I take my profit?”

Keep in mind that you must keep your losing trades limited to the pre-set value and never take a loss greater than that which is set. Having preset loss limits enables us to look at ways of maximising our profitable trades. I recommend clients have a minimum profit expectation of twice the average loss value before taking in a trade.

Trading a system requires a trader to take all trades. It is easier when you know in advance that any loss will be limited to a known amount so that there is no ‘surprise’ factor. It is a matter of taking a position and then managing the correct exit.

If you spend any time at all in Forex (FX) trading forums you’ll see constant questions like: “What’s the best FX trading system?, what’s the best free Forex trading system, or where do I find good Forex trading signals?” There are so many expert advisors (EAs), indicators, and systems available that it’s nearly impossible for a novice trader to find a decent FX trading system, or one that produced consistent results. Still, given a little information, traders should be able to identify a system that will work for them. Any FX trading system worth following will have four traits:

• The FX trading system will trade with the long term trend.
• The system will provide inflexible rules.
• The FX trading system will use a very limited set of indicators and will rely on an easily identified setup.
• Finally, the ideal FX trading system will provide a positive financial edge.

Whether you are trading stock, commodities, or a Forex market, following the overall trend should be your first priority. Trading against the trend might get you a few winning trades, but a prudent trader sticks with the overall trend. Chasing retracements is okay if you want a rush. If you want to make money, you need to manage your trading like a business. That means that we make purchases at a lower price than the projected sale price. Counter trend trading goes against that rule. There are several methods for determining a trend. I recommend the Blue Zone, or a similar method for determining the health of a trend.

The ideal FX trading system will provide you with an iron clad set of rules for trading. Your trading results will be tightly correlated to your adherence to rules. When selecting a trading system, make sure you can live with the rules. If you cannot, find another system. If you find that your emotions will not allow you to follow these rules, find another way to make money. A system will only work if you use it correctly and consistently.

When reviewing messages in the Forex trading forums, you’ll often see charts. Some of these charts are so covered with indicators that you can hardly see the price action! The best FX trading system will only use a couple of indicators. The Blue Zone system, as an example, only uses three simple moving averages (SMAs). It uses these to determine the health of the trend. The best FX trading systems will couple these few indicators with setups that are incredibly simple and easy to identify. There are systems that use ascending triangles, multi-candle setups, and complicated crossovers. Those are just too complicated to be of much value, and in my opinion, lack consistency. The Blue Zone system uses a single candle setup. This single candle is highly predictive of reversals and will provide consistent results. Of course you have to know which times to trade it.

Finally, any FX trading system can be judged on one metric alone, the Financial Edge. Financial edge is a simple formula. It states: E= (AW*PW) – (AL*PL) Or, in English it states Edge equals the difference between the average winner times the probability of winning and the average loser times the probability of a loss.

Example System:

Average Winner: 200 pips

Probability of win: 15%

Average Loser: 25 pips

Probability of loss: 85%

Edge = 8.75 pips.

The above example illustrates how important edge is and how unimportant percentage of winning is. We only won 15% of the time in the above example. Using the system consistently, however, would give us nearly 9 pips per trade! Our goal in Forex trading is not to win more often. Our goal is not to win at all. Our goal is to make money. The sooner this is learned, the better.

When reviewing the numerous systems available for Forex trading, if you remember the preceding facts, you’ll be well on your way to finding or developing the perfect FX trading system.

A trading system acts as a control on an ambitious trader’s tendency to be whimsical, impacted by the volatility of the market. A trader follows sets of rules to decide the entry and exit from a position. By investing methodically and in a disciplined manner, a trader is able to get reasonable profits and at the same time, check losses. Share trading is a split seconds game. Your benefits of successful trades may be wiped out with one wrong trade.

Computer software has come to dominate the trading system. Each software program is organized around a general set of principles. It provides you with the information sought for, according to the feed and gives the results. Automated trading can not be perfect always. Intervention of the human being to arrive at the correct conclusions is inevitable. If automated trades were to provide the infallible results, stock exchanges would have long ceased to exist. The pendulum of trading swings between losses and gains. Some investors have to gain, when the others lose. The situation of permanent gain for all investors can not happen in share trading.

With thousands of shares listed in the stock exchanges all over the world, for a committed investor, there is no alternative but to adopt a trading system as per one’s choice and needs. In the society impacted by the modern materialistic civilization, the pace of life is fast, and the time-saving mechanisms are welcomed by the hard-pressed brokers and investors. Your trading will not give more profits depending upon the time that you spend on watching the developments in the exchange. You need to trade efficiently and intelligently making the best use of the software dominating the trading systems.

The issue does not end with in investor adopting a particular trading system. Its implementation is important. It can be implemented by a broker who owns the real-world trading experiences. The ultimate objective of any trading system is to profit from the investments and a broker will employ a particular trading system as per the need of the investor. The test of a good trading system is its practical application. It must withstand and emerge successful through all types of economic cycles- growth, inflation and recession.

Use of technical terms in a trading system can not be avoided, but the system needs to be user–friendly from the point of view of a common investor. The directions provided to the investor need to be meaningful and straightforward so that it is easy for the investor to follow them, without much hassle. The trend changing signals must be easy to go along.

A good and bona fide trading system is difficult to understand and therefore you need the services of a knowledgeable broker, while you adopt the system. A working trading system does not mean that you are guaranteed of profits in all trades. It can only assist you in profiting from your investments. The expertise of the broker in trend following coupled with the benefits of the trading system provide the reasonable assurance of profits and stopping abrupt losses.

The introduction of the Robot in the trading system is the major development from the point of view of the investor. The services rendered by the robot are comparable to that of the professional trader. The Robot is designed to give you the stock picks in real time. The robot is the master of patterns and trends that take place in the exchange.

Stock trading system software is gaining fast popularity amongst the brokers and investors. With the automated trade decisions, it takes the emotion out of the trade. Traders no more need to speculate. You are safe from your misdirected instincts. So consider your options carefully and adopt a trading system and take advantage of the internet revolution.

One of the best ways to trade the Forex Market is to use a mechanical Forex trading system. By that I mean, follow a predetermined set of rules that dictate when to enter a trade, money management and when to exit the trade. Basically, you just look for the set up according to the rules, and if it presents itself you place and manage the trade. If the set up is not there, you don’t place the trade.

The point is, if you want to be successful trading Forex, you MUST have a plan, or set of rules to guide your trading. Now, regardless of whether you study everything you can get your hands on about Forex Trading and come up with your own system, or follow a Mechanical Trading System ALREADY producing great results… there is one big problem!

No Mechanical Forex Trading System Is Perfect

Yes, it is true. No mechanical, or automated, Forex trading system is 100% on delivering winners. But the good news, is you don’t have to win all the time to be profitable trading Forex. With proper money management, you can even lose 50% of the time and STILL be profitable! So, not being 100% is really not the problem. But is is a factor that leads to the problem.

The Search For The Holy Grail Forex Trading System

Since no mechanical Forex trading system is perfect, it leaves room in traders minds for doubt. Even if they are using a system that makes them consistent profits, they are still looking for something better. What happens is they jump from one trading system to another with the hopes of finding something that works better.

And this is the big problem. When traders are off searching for a better mechanical trading system, they are not trading the system that already works profitably. They keep buying more products. They keep testing more systems. They won’t commit to trading ANY system until they find the PERFECT system (which we already know doesn’t exist).

How To Eliminate This Problem

I believe the fastest way to eliminate this problem is to choose a mechanical Forex trading system ALREADY getting great results and then dedicating yourself for a full 30 days to using the system. ONLY open charts with that ONE system and ONLY trade that ONE system for a full 30 days. Keep track of all the trades you make. your winners and losers, lot sizes and risk management, etc.

At the end of the 30 days, I’m sure you are:

1. Going to be a better trader. After all, when you practice only 1 trading system you are going to get better at it. This usually results in more profits!

2. Going to make a lot more money. After all, when you are searching, testing and playing around you are NOT making any real trades!

Don’t keep thinking the grass is greener on the other side. Pick a mechanical Forex trading system and stick with it. What you’ll learn when you stop chasing down every wild promise is amazing, and can make you the profitable Forex trader you’ve always wanted to be.

Finding the best Forex trading system for oneself can be quite a tedious task especially if one does not know how to go about it. Nevertheless, however difficult it may be, it is not impossible either. All one requires is a lot of patience and time – then sooner or later he is sure to come across the right system.

One can start the search for the right trading system from the Internet. Once you start reading about Forex you’ll come across numerous trading systems all claiming to be the best Forex trading systems. If you are a beginner in Forex trading training then probably the Forex forum would not be the perfect way to make a head start.

Now you may ask – if not the Internet, then what? Well! There are other ways too that can help you locate a good Forex trading system. Let us see one more method through which you might be able to find a great system.

Price – A Good Way To Locate A Trading System?

Traders have always used the price to trade anything in the stock market. So unless you understand the importance of price and go through its minute details your understanding of the best Forex system is not complete. Only after you understand the movement and the action of the price can you become a successful trader. Even the best and the most expensive trading system are of no use if you do not understand the importance of price. So locate a simple price chart to help you be a successful Forex trader.

Once you have understood the importance of price for trading Forex, you can go ahead and pick a trading system from the various ones available on the Forex websites. Forex education is at an all time high today and there are many online Forex trading platforms that provide demo accounts and tutorials for a beginner to practice on. Once you have grasped the fundamental requirements of Forex trading you can simply make the transition from using demo accounts to using real money.

Try and pick a Forex trading course that is simple for you to understand and provides a step by step learning approach. Also remember to tighten your grip on the tricks of the trade before you jump into read trading. Develop some strong strategies to help you develop a more logical and practical approach to Forex trading.

Things To Remember While Picking A Trading System

You would require a Forex trading system only when you finally start trading on your own. A trading system is a mechanical system that would help you keep a track of the market and assist you by setting off its indicators when profit is seen. Look for the following elements in the system to ensure that you are picking the best Forex trading system for yourself:

• The profitability record
• Ease of use
• User friendliness
• Support system and guarantee
• Cost vs. Benefit ratio

If you are able to locate a trading system that incorporates all of the above, you can be sure that you have picked up the best Forex trading system for yourself.

A question many traders would like to know is “Do CFD Trading Systems work?” and if they do why aren’t more people using them? Today we will take a look at the critical information you need to know about CFD trading systems.

The three main criteria we will look at to see if the CFD trading system will work for you are:

• Check the statistics of the CFD Trading system first.
• What sort of drawdowns does the system have and are you capitalized to survive those drawdowns?
• Does the CFD trading system fit your psychological profile?

1. Check the statistics of the system first. Before jumping on board of any CFD trading system you need to do your due diligence on the very important ‘numbers’ of the system. Some of the more basic trading numbers to consider are the % win, % loss, average win, average loss, expectancy and the average time frame for a hold for both wins and losses.

Whilst the marketing of any CFD trading system is normally brilliant and demonstrates fantastic returns, no one can hide from the real numbers of actual trades done. One of the most important trading numbers to consider is the expectancy of the system and will that expectancy help you achieve your trading goals.

2. What sort of drawdowns does the system have and are you capitalized to survive those drawdowns?

Most people who consider using a CFD trading system are only interested in the winning trades and nearly always neglect the systems drawdown period. A drawdown is where your trading account sustains a period of losses. An example is if you had $10,000 in your trading account and you lost $3000 then you would have had a 30% drawdown.

Some of the best and most profitable trading systems can have drawdowns in excess of 20 to 30% without any leverage. Consider if you add CFD leverage to the equation you can see that you could easily wipe out your CFD trading account fairly quickly. Always consider the maximum drawdown of the system and determine the appropriate risk management strategy to ensure you stay well capitalised.

3. Does the CFD trading system fit your psychological profile?

The last point to consider is whether or not the system fits in with your psychological profile. This can be a little tricky as you need to understand how your mind works and how you react to certain circumstances.

As an example you may not be able to handle a high percentage of losing trades but the trading system you are looking at is a trend following system with occasional big wins. As you can imagine most people love big wins and will overlook the high percentage of losing trades and begin trading a system that is just not right for them.

So as you can see there is a lot more to picking a winning CFD trading system that just believing the marketing hype.

Action: Discover the 7 most Critical CFD Trading Tips and 2 of the most common CFD Trading Strategies. Learn more about the CFD revolution by going to http://www.learncfds.com/