It takes more than a good system or a signal provider to beat the forex market. A good system or signal provider is certainly an essential part of the process, but many other things you should do in order to achieve beating the forex market. Here is a list of factors and actions to take into consideration:
The forex market is by far a random market. Why random, because no one can guess the effect of any news piece on the market. While good news for the dollar could take it up, yet many times it could lead to a decline of the dollar. It is the actions of millions of traders which drive the market, and one can guess in which way the traders would act.
Randomness is very hard to beat. But with a good trading system you can at least come out break even or slightly winning. A smart trading system is a system which does not depend on the income and effect of news, but takes into consideration both market reactions, and sets the orders in a way were the trader would benefit either way, and the Risk to Reward Ratio is low . Although the hit ratio could be 50-50, yet since R / R is low, then beating randomness is fairly possible.
2. The Edge
If you ever went into a casino and played roulette, then you would know what the edge is. Roulette even it is a purely random game, yet if you place the bet on the same number every time, you will not end up winning or even in break even. If you bet on red or black, the green (zero) will play against you.
In forex, the spread is the edge. Whenever you enter a position, you enter it losing. If the spread for GBPUSD is 4 pips, and you buy or sell 1 lot, then you will be losing $ 40 at once. Now, you have to win 4 pips before you become break even. Now here is the trick, you should always try to lower or eliminate the edge. One way of doing so is to find a broker with narrow spreads. Every pip you save will count to your equity. Narrow spreads are easier to overcome.
3. Losing streaks
Sometimes "bad luck" strikes. Even the best systems in forex will face some losing streaks. What to do? Stop trading the system? Continue? If you stop you will never know if the next trade is going to make all the losses, and you could lose the opportunity to overcome the losses. And if you continue, you would face pleading your equity!
So what to do? The best thing to overcome such danger is to trade multiple systems at one time. Different systems will not face the cracks at the same time. One losing system would be overcome by another winning one. The result is good.
Never give up to slippage. Do not let it damage your trading habits. Just instruct your platform to only fill orders up to a max of 3 pips slippage.
Source by Yannis Giamadapoulou