Forex Trading Systems Vs. Forex Trading Strategies

When comparing forex systems to forex strategies, system-based trading methods are generally more rigid and thus less flexible. Meaning they are based more on rules and are less flexible. It is important to know the difference between system-based trading methods and those trading methods that are more of a trading strategy or a frame-work.

Trader’s who commit to the more rigid approach of forex systems, generally are of the mindset that trading can be quantified and defined in terms a computer program can make sense of and profit from. The other half of the Forex system camp, consists of traders who like to trade a systematic approach that is based on numerous lagging-indicators.

Emotional trading is the biggest problem for most Forex traders, so the system-based trading camp has the right idea in trying to eliminate emotion from their trading. However, the markets are not static or easily definable, this means that trading with rigid methods like computer programs or lagging indicators is very difficult. This point means that trying to profit consistently and long-term with such rigid trading systems is very difficult since they tend to lose profitability as market conditions change. Thus, what we have is a debate about which is the best way to trade: with forex trading systems or Forex strategies.

When you trade with a strategy you have more flexibility, this means you can use discretion in deciding whether or not you should trade. Generally, strategy based trading works the best long term because it gives you the ability to develop your gut trading feel, and this allows you to naturally adapt to the ebbs and flows of the market. Perhaps the most effective Forex strategies is that of price action trading. This method allows traders to use a “clean” price chart, with no indicators, making use of only the natural day to day price action that occurs in the market.

Markets are simply just representations of human emotion in the form of price movement, price action trading allows us to take advantage of this. Since price action shows emotion, it only makes sense to learn how to read it and trade off of it. Ultimately, trading systems based on indicators and computer programs, display price movement in a way that is disconnected from the natural price action of the market. When you attempt to trade off of something other than the natural price action of a market, you are basically just adding an extra step that is both unnecessary and confusing.

If you would like to learn how to trade with an effective Forex trading strategy, you really need to obtain effective Forex trading education. Just like learning any other skill in life is best learned through someone already experienced in that field, the best way to learn how to trade is from an experienced trader. You should also understand that when you learn an effective forex trading strategy, you are learning how to trade forever, and your strategy will teach you how to adapt and grow with the market, instead of using a systematic approach which does not really teach you anything.