Forex Trading Systems Vs Forex Trading Strategies
Forex trading systems are typically more "systematic" methods of trading the markets than Forex trading strategies are. By systematic, I mean they are more rule-based and rigid. It is important to know the difference between system-based methods and those trading methods that are more of a strategy or a frame-work.
Trader's who commit to the more rigid approach of forex systems, generally are of the mindset that trading can be quantified and defined in terms a computer program can make sense of and profit from. The other side of the Forex system camp are those traders who trade with lagging indicators and design trading systems around these price analysis "tools".
Traders in the system-based camp have the right idea in trying to eliminate emotion from their trading, as emotion-based trading is indeed the biggest obstacle that traders have to face. However, the problem with trying to trade based off a computer program or with rigid and inflexible trading rules, is that the markets are inherently dynamic and constantly changing. This fact makes trading with such rigid Forex systems difficult to profit from long-term, because they tend to lose effectiveness over varying market conditions. Thus, what we have is a debate about which is the best way to trade: with Forex trading systems or with Forex trading strategies.
Learning to trade the market with a strategy based approach means that you take a more flexible approach that will allow some discretion in whether or not you enter a trade. Typically, this type of trading style works best over the long-term because it allows you to improve your "gut" trading sense and gives you away to adapt to the constantly changing market conditions. One of the best Forex trading strategies is that of price action analysis. In this trading method, traders learn to tread an indicator-free price chart, making use of simple price action setups that occur periodically as a result of the natural movement of price.
Financial markets are ultimately a representation of human emotion; price action reflects how people feel about a given security. So, it makes logical sense that learning to read this emotion is the most efficient and effective way to trade. Essentially, most Forex trading systems just display price information in a different format; something other than actual price movement. 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.
If you would like to learn how to trade with an effective Forex trading strategy, you really need to obtain effective Forex trading education. The best way to learn how to trade is from an experienced trader, just like learning any other skill in life is best learned through someone already experienced in that field. It's also important to consider that when you learn a Forex trading strategy instead of a rigid trading system, you are learning how to think about and understand the markets, instead of just blindly entering and exiting.
