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Criteria for Selecting Forex Systems

Every forex trader is in the market to make money, and that is why there is such a demand for forex systems that can deliver profits month in, month out.

Much of the success a trader in the forex market can achieve is ascribable to his forex systems. With so many forex systems being sold out there with overhyped, glamorous sales pages, it is very easy for a beginner to lose his way. As a trader, you have to realise that the number one priority of marketers and vendors trying to sell forex systems online or anywhere else, is getting you to part with your hard-earned money in exchange for their products. That is their number one priority. Your success with their forex systems is a distant second. Sharks gather where there is blood in the water, and in the forex market, your money and that of other traders that make up this huge $4.2 trillion/day market will attract many sharks. You stand alone in this market and you have to protect yourself.

So how do you determine which forex systems will be suitable for you? We have compiled a list of criteria to help you out. Some of these are:

1)      Profitability: If a forex system is only marginally profitable or allows you to just breaks even (not to mention losses), then the whole point of trading the forex market is defeated. You may as well close shop and stick to your regular 9-5 job. Access the profitability of a system by searching forex forums for users who have actually purchased and used these forex systems. Their experience will be your best teacher. With the Internet, it is not hard to fish out the non-performers.

2)      Drawdowns: Does a system operate in such a way that trade entries are made at points where there is likely to be a period of sharp negative movement before the trade turns around in your favour? Such a forex system is not worth its salt; you probably will visit your doctors with hypertension before your account recovers from any trades like this.

3)      Durability: Can the advertised forex systems stand the test of time? Or will the dynamics of the market (such as the 2008 global financial crisis) cause them to become obsolete?

4)      Do other traders who have used this system vouch strongly for it? A visit to some of the popular forex trading forums will easily provide the answer.

This is not an exhaustive list of criteria, but it is a great way to start. With these points, you can eliminate bad forex systems 90% of the time. You also need to demo trade these forex systems extensively for you to be able to test the performance of these systems in different trade scenarios.

Better still, you can use some of the strategy builder software available online to develop your own forex systems, some of which you can take a step further by converting to expert advisors.