Setting Up a Forex Trading System

Trading System
What are you comfortable with?
Momentum, Swing or Position Trading?

Momentum	Swing	Position
Minutes - Hours	1-3 Days	1-3 Weeks

Where to place your orders in high probability areas

Entry
Technical Driven?
Fundamental Driven?
Random Entries?

Targets
Support/Resistance?
Breakout and Trail?
Fundamental Targets?

Stops - Where would you say the market has to go to consider the current trend over?
Trailing Stops Does your system call for an instant close of a position or moving the stop and letting the position run?

Back Testing*
Automated System - Easy Back Testing
Visual Back Testing - Some Limitations
*Back test on tick data for most accurate results

Trade more than one trading system?
Smoother Equity Curve
Absorbs Market Changes if Strategies Diversified
Different Strategies for Different Currencies?
Commodity Currencies CAD
Export Economy Currency JPY
Semi-pegged, government controlled HKD

Sufficient Risk Capital
How much of your total trading portfolio can be used in FX?
How much does the System Require?
Largest Trading Strategy Draw Down?
How much profit/money to you want to draw out a month?

System Discipline
Risk per trade
Proper Use of Leverage
Allow System to Work(Don’t modify or change mid voyage)
Strictly Follow System or your Back Testing will be Inaccurate
Risk to Reward

Different ROR depending on back testing to maximize profits and/or minimize losses.
1:1 Risk 10 pips to make 10 pips >50%
1:2 Risk 10 pips to make 20 pips >33%
1:3 Risk 10 pips to make 30 pips >25%
1:4 Risk 10 pips to make 40 pips >20%

Constantly analyze your system and results. Markets are dynamic and certain market changes might lead to system revisions.