Best Foreign Exchange Trading Systems for Money
Guest post by Xtreme Pip Poacher
If we take a scalping system that makes a mean of twenty pips on a profitable trade and loses a median thirty pips on a loss-making trade, with 80% of its trades being worthwhile and only 20% losses, this is the edge for this system:
Edge = (80% x 20 pips) – (20% x 30 pips) = 10 pips
That would be a lucrative system and a really good one to use if you had an interest in changing into a scalper. For instance, you may come across a system that worked the other way, with a lot of small losses, say 60% losses of 10 pips every time, and then some bigger gains, making say 40 pips average profit on successful trades. For this system,
Edge = (40% x 40) – (60% x 10) = 10 pips
So these 2 completely different systems have exactly the same results, and the choice on which was the best currency trading system for you would be totally conditional upon your trading style. A good way to test this out would be to operate both systems in a demo account, say for one month each. At the end of the month you might analyze the theoretical results from a back test over the month to see how your own results sundry from the back tests. This would give you an idea of how successful you would be operating that system in reality. This could be a helpful comparison when choosing the best currency trading system from a number of systems that are profitable in principle.