Forex trading with the help of signal generating software has become like a wildfire, spreading from the experienced forex trader all the way down to the newbie trader. Dependability upon such systems has produced profitable results for some, but on the other hand has seen some to a near hypertensive situation due to over dependability and complete disregard for money management techniques. The question then becomes, is it advisable to use forex signal software? The answer I will propose to this is a yes... and a no... Yes if you are prepared to test the system on a virtual account applying money management and using a portfolio that reflects your expected capital for a life account. No if you are going to test the system using a virtual account with hundred thousand (when your capital is barely five thousand) without money management.
Trading with signals generated by third party software, demo trading the system is not optional but compulsory. Also you could use a mini account with limited capital that you are prepared to give up the market (high probability of this happening) if things turn ugly. If you find the signals to be giving you good trades and therefore decide to go life, it is important that you keep a record of all the trades entered. In recording your trades you can do this on an excel spread sheet and the reason you have should do this is to analyze the signals from time to time, as signals at times do not respond to market changes. So what works today might fail tomorrow and a log of your trades will help you to work out properly your profit to loss ratio (even though your diminishing account will speak for itself).
Another reason why you must document trades generated by the forex signal software is to help you keep track of what currency pairs gives you more profitable trades (this is mostly the case). Certain currency pairs are trending pairs while some others are ranging pairs. So by recording your trades you should be able to determine if the signals work better on trending or ranging currency pairs.
Certain forex signal software provides signals for day trading while others are for swing trading, so before you set out to subscribe to a particular third party software ensure that you are clear about the sort of trading signals been generated so that you will know exactly if this matches your style of trading. Do not trade a day trading signal if your system has always been swing/position trading.
Karen Fairham is an individual forex & futures trader. For more information and tips on online forex trading visit: http://forexxtrader.blogspot.com
Trading with signals generated by third party software, demo trading the system is not optional but compulsory. Also you could use a mini account with limited capital that you are prepared to give up the market (high probability of this happening) if things turn ugly. If you find the signals to be giving you good trades and therefore decide to go life, it is important that you keep a record of all the trades entered. In recording your trades you can do this on an excel spread sheet and the reason you have should do this is to analyze the signals from time to time, as signals at times do not respond to market changes. So what works today might fail tomorrow and a log of your trades will help you to work out properly your profit to loss ratio (even though your diminishing account will speak for itself).
Another reason why you must document trades generated by the forex signal software is to help you keep track of what currency pairs gives you more profitable trades (this is mostly the case). Certain currency pairs are trending pairs while some others are ranging pairs. So by recording your trades you should be able to determine if the signals work better on trending or ranging currency pairs.
Certain forex signal software provides signals for day trading while others are for swing trading, so before you set out to subscribe to a particular third party software ensure that you are clear about the sort of trading signals been generated so that you will know exactly if this matches your style of trading. Do not trade a day trading signal if your system has always been swing/position trading.
Karen Fairham is an individual forex & futures trader. For more information and tips on online forex trading visit: http://forexxtrader.blogspot.com
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