Forex Trading Methods: What makes a trading method "good"?

Today I want to take a few minutes to talk about Forex trading methods, because we are constantly bombarded with new methods or systems almost daily, and I believe traders have little chance of being able to identify the right ones to use, the best performing or the most educational. With so many methods, systems and automated programs, how do you select the one that is best for you, or the one that gives you the best opportuntity for Forex trading success?

I've developed a simple set of rules to follow when evaluating a Forex Trading method, course, system or program and today I want to share them with you.

First and foremost, any Forex trading method you consider must be complete. By complete, I mean the Forex trading method must teach you the following:

1. The precise conditions under which you can consider a Forex trade to be entered into. These are known as the "setup" conditions and refer to the technical indications (usually) that a Forex trade possibility exists.

2. The exact point at which you would enter into a Forex trade (price). This refers to the Entry Point (or Entry Rules) and means the price at which a Forex trade would be executed.

3. Rules for establishing initial and ongoing Stop loss marks for an open Forex trade. As part of Risk Management, it is imperative, especially in Forex, to have Stop Losses ALWAYS in place. If a Forex trading method or Forex trading system does not teach or define these, you should abandon it -- without effective stop loss management you can be easily wiped out in a single Forex trade should the Forex market move against you.

4. The exact points and an effective strategy for exiting a Forex trade. Unlike stocks, you will rarely, if ever, find yourself holding a Forex pair position in the Forex markets for extended periods of time. Therefore, it is also important that a method teach you a strategy for exiting a Forex trade once that trade has become profitable.

Combined, these four elements will help you to eliminate chance by streamlining your Forex trading decision making process. Without any of these, no forex trading method, system or program should be considered because in each individual case, forex traders will be exposed to steep losses or taking poor Forex positions. Keep in mind, not every setup will execute into a Forex trade, nor should every Forex trade be taken. Combined, these rules will help to protect you both in evaluating a method for its use and in executing the method when trading Forex.

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