Forex Currency Trading Systems Vs. Forex Currency Trading Strategies

Forex systems are more rigid than forex strategies are, thus they are more “systematic”. When I say they are more “systematic”, I mean they are more rule-based. While you learn to trade Forex, it is very important that you know how system-based methods differ from strategy-based methods.

People who use Forex trading systems to trade are likely to erroneously believe that trading can be quantified in a way that a computer can use to trade successfully over the long-term. The other half of the Forex system camp, consists of traders who like to trade a systematic approach that is based on numerous lagging-indicators.

Those traders in the system camp have the correct idea with trying to eliminate emotion based trading decisions, because emotional trading is definitely the biggest problem most traders encounter. However, the markets are not static or easily definable, this means that trading with rigid methods like computer programs or lagging indicators is very difficult. Forex systems that are inflexible and rigid tend to lose effectiveness over time, thus trading with such rigid methods makes it hard to profit long-term. Thus, we have a debate about what the best way to trade is: with forex systems or trading strategies.

When you trade with a strategy you have more flexibility, this means you can use discretion in deciding whether or not you should trade. Trading with a strategy-based approach works better long-term because it allows you to develop your discretionary trading sense, this in turn allows you to adapt to market conditions that are constantly in flux. One of the best Forex strategies is price action analysis. This method allows traders to use a “clean” price chart, with no indicators, making use of only the natural day to day price action that occurs in the market.

Markets are essentially just a reflection of human emotion and price action displays this emotions and allows us a way to trade it. Thus, it only makes logical sense that learning how to interpret this emotion is the best way to trade. Basically, Forex systems just show price action in a different format; something other than the core price movement of the market. Trying to trade off of a derivation of raw price movement, is just adding in an extra unnecessary step that makes the process of profiting in Forex much harder than it needs to be.

Trading consistently and with an effective Forex trading strategy, requires that you get a good forex education. Just as you would need to obtain professional instruction to learn any other skill or profession, you the best way to learn how to trade is from a professional trader and mentor. You should also understand that when you learn an effective forex trading strategy, you are learning how to trade forever, and your strategy will teach you how to adapt and grow with the market, instead of using a systematic approach which does not really teach you anything.