There is a multitude of systems that can be used to make trading decisions on the foreign exchange market. However, there is no such thing as a system that never makes a loss and no one system is right for every trader.
Although each trader must take his or her personal needs and skills into account when choosing a system, there are some basic things to look for. One of the most important aspects of a profitable trading system is that it must not require any readjustment. Having to repeatedly adjust the system to keep up with changes in the market only increases the likelihood of causing an error in the system. A good system can be used exactly the way it is to bring long-term success independent of the market direction. A system that has been designed for long-term success will be able to show consistently good results over at least a five-year period.
Hypothetical or simulated performance results are the most common way of evaluating a system, but these results should be based on real world—not hypothetical—data. The downdraw of a system should be considered in order to assess the volatility, and thus the risk, involved in the system. Downdraw is the amount of decline in an account's value from the highest value to the lowest value.
Brokers and Managed Accounts
Unless you’ve got a million or so to invest, you’ll be trading through a broker. Before you settle on one brokerage firm, though, do some solid research to find a firm that not only provides high-quality services, but that provides the type of services you personally need. Not every broker is a good fit for every investor. When choosing a broker, consider what account types and leverage options are offered, the spread you’ll be allowed to trade at, what trading platform and research tools are offered, and the level of customer support. The foreign exchange market operates around the clock, so your brokerage firm should have live customer service available twenty-four hours a day.
If you’re interested in investing in the forex market, but lack the time or expertise to trade for yourself, a managed account is another option. With this type of account, you give permission to a fund manager or trading agent to make trades on your behalf. When choosing a managed account, look for a fund manager who can personalize his or her trading strategy to meet your needs. Also, consider the fund manager’s risk management strategy and be sure you’re clear on the fees involved.