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Why you need Forex trading systems and strategies.
Learning how to trade profitably requires you to learn and master a few Forex trading systems . The key to trading is becoming a master of a few trading strategies not the jack of all. Forex trading systems are important as they will provide you with structure, a set of rules and a plan to follow. This article will discuss some of the different types of Forex trading strategies that are currently in the Forex market and teach you how to identify what makes the best FX trading system.

Indicator Driven Trading Systems.
Approach with extreme caution, indicator driven strategies are often designed by someone who notices that this set up is currently working right now. The problem is just that, it's working for that present moment and often very little analysis has been done to understand the longevity of this Forex trading system.

The largest issue with Indicator based Forex trading systems is that it uses indicators to generate a trading signal as opposed to pure price action. Indicators are lagging and therefore tend to give poorer and late signals than pure price action which is most up to date information on the chart.

However, as this trading system often looks exciting and 'sexy' on the charts many amateur traders find this trading strategy far too tempting.

Some guru's latest flash in the pan trading strategy.
A trading system which comes with the guaranteed promise that you will 'never lose again and will turn your computer into an automated cash machine'; Unfortunately the world is filled with these so called 'guru's' and their millionaire making Forex trading systems. Experienced traders know that losing trades is part of the game, you will always have losers and winner's you must be prepared to take loses. Professional traders understand no Forex trading strategy is ever guaranteed, however with trading results and back tested performance figures that focus on the overall picture of success. The best way to avoid falling victim to these scams when finding a Forex training company is to have proof of their strategies live trading results. This way you will understand the realistic and honest performance of their strategies.

Trading systems that actually work …

Harmonic trading patterns.
Harmonic trading is the art of recognizing particular price patterns in line with Fibonacci extensions and retracements to calculate turning points in the financial markets. Confused yet? Harmonic trading is complex and requires a lot of time and practice to master, yet it could be one of the best trading systems because it offers high reward vs risk ratios and it is very versatile. It can be traded on any market on any timeframe.

If you are just starting off learning how to trade the market your initial focus should not be on harmonic trading patterns as they will take a lot of time and focus to understand. However for more experienced traders looking for a new trading system to add under their belt, harmonic trading is worth a look.

Old school technical analysis trading strategies.
This particular trading system is well known and well traded through the Forex community for many years. Technical analysis includes; ascending triangles, consolidation breakouts plus head & shoulders patterns, flag patterns to name a few. The benefit in learning these trading systems is that they do work and they have decades of data to prove it.

The downside to these systems is many newer traders find this approach to trading dull and perceive it as old fashioned. It lacks the glamor and excitation of indicator driven system. It's not busy and flashy and unfortunately, newbie traders often mistake complexity as a sign of better performance and higher probability. However the reason old school technical analysis is still around is because it works, and plenty of experienced profitable traders use it in their own trading style. Other than missing the excuse, old school technical analysis trading systems tend to have a lower success rate, which a lot of people are unwilling or unable to deal with. A lower success rate does mean the winning trades are typically very large, which makes the system profitable and worth learning as it gives you a solid foundation in learning the Forex markets.

Price action trading strategies.
Now what you have been waiting for, I reveal the best Forex trading system you can learn is price action. Price action trading is the reading of the raw price action on a chart. The price is the most up to date information on the chart, so it will give you the most current situation when reading the chart. Price action as a Forex trading system is an incredibly simple method that is effective and functional as it works in both trending and changing markets, with and against the trend. Learning price action can simplify your Forex trading and dramatically improve your results. With price action a trader has the advantage to trade any market on any timeframe, as price action setups are effective in all market conditions.

Price action trading systems to learn:

1. Pin Bar Setup.

The pin bar price action Forex trading strategy is a reversal system. It is designed to trade tops and bottoms of markets and can also be used in trend continuity by buying dips in upward trends, and selling peaks in downtrends.

2. Inside Bar Setup

Inside bars can be used very effectively when trading Forex. They are primarily used when trading strong trending markets as a trend continuation strategy.

3. Engulfing Bar Setup

Engulfing bars are great for trend reversals. They are rare, but a very strong price action reversal signal. Can be used when trading trends, but typically found at end of trend reversals.

4. Fakey Setup

The fakey setup is a trend based trading approach that watches for a false breakout of an inside bar formation. This setup can usually be found at levels of support and resistance, very similar to the pin bar setup. Fakey's are used to buy dips in upward trend, and sell peaks in downtrend.

Price Action Trading Systems … Your First Step.
Do not get overwhelmed focus on a few price action trading strategies only. Trade these setups on a few different currency pairs. Grow your confidence. Become comfortable with identifying setups and really understand how to enter the trade step by step. Start with one price action Forex trading system and only when you are completely comfortable add another trading system.

Conclusion.
It's fair to say that so long as you stick to something like price action trading or old school technical analysis you can not go far wrong. Be warned about all those different indicator systems out there in the forums, and make sure that you get your Forex trading education from a company with live trading results, and experienced traders.

One of the biggest challenges inexperienced traders create is changing and changing between different trading strategies. Choose a Forex trading system and strategy that matches your personality. It may take a couple of attempts, but once you find one that you like and can become consistent trading it, stick with it.

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Source by Andy H.