Following a Trading System

Many trading systems have been developed that can give a disciplined trader a decent return when trading forex.

Nevertheless, the key to success when trading a system is to learn to follow the rules that you have devised. Following your system with the necessary discipline can not only allow you to manage your trading activities but can also help you control your emotional responses.

In essence, if you have not taken the time to develop and write down an objective trading plan that you can follow, you will have a much more difficult time showing a consistent profit in your trading business. 

On the other hand, once a good trading system has been developed and the discipline to follow it achieved, the road to success as a forex trader has been cleared for the trader to follow.

Helpful Suggestions for Following a Trading System

Some of the most important suggestions to practice and keep in mind when following your trading system include the following:

(1) Treat your trading system like a respected business partner and follow all of its trading suggestions closely. Do not second guess your trading system.

(2) Manage your trading risk consistently by having stop loss orders placed in the market as soon as each trading position is initiated.

(3) Never take a position based on influences outside your trading system like something you have read or a trading recommendation you have received from someone you have spoken to.

(4) Keep your trading system simple. Avoid having too many systems operating at the same time or from trading too many instruments since this can significantly degrade your ability to follow any of them accurately when trading.

(5) Write down an analysis of what happened every time you stray from your system in your trading journal, and aim to avoid such lapses of discipline in future.

(6) Follow your money management strategy carefully. Consider using calculations that can more objectively determine each trade’s position sizing, perhaps based on risk reward parameters.

Risks From Not Following Your Trading System

Perhaps the most significant error that a trader can make is to not follow the rules that they have set for themselves to manage their trading activities. 

This loss of trading discipline can have disastrous results for your trading business and should be rigorously avoided.

Overall, far too many traders who have now given up their trading businesses have taken what could have been a profitable trading system and turned it into a losing system by stepping outside their systems’ rules too often.

Some of the other common trading errors that arise from failing to follow a trading system are listed below:

·         Not Entering a Signaled Trade

·         Entering Trades Based on External Factors

·         Not Placing Stop Orders in the Market

·         Trading Too Many Systems

·         Taking Too Much Risk

Each of these potential pitfalls and ways to overcome them are discussed further in the following section.