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An article on Currency Trading and related topics

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Comparing Forex Systems - What You Should Know

By: Jon Provencher

There are a number of things to study when performing a forex system comparison. There are many forex system vendors out there, this guide will assist you to pick the one right for you.

1. History - Does the system vendor provide a history? A good strategy method vendor should be able to tell you the systems monthly results for at least the past year. If the strategy method hasn't been running for a year, ask what the back-test results were.

2. Draw-down - Drawdowns are unavoidable in trading the forex market. There are a lot of forex systems making a huge profit each year, but they neglect to tell you that you would have lost all/most of your account before making those 1000's of pips. You should always check what what draw-downs the system has had in the past and use this to determine how many lots you are going to trade to ensure your account is not wiped out. Think about the emotional impact of the draw-down, would you have been able to stick it out?

3. Reviews - Search to see if others have traded the same forex strategy method. Have a look what others are saying about the system. Check if the strategy method has its own forum and have a look at what kind of feedback the strategy method is receiving. Often users have tweaked the system and found a better way to trade it, check what the latest settings are before you start trading.

4. Win Ratio - Professional traders often have a win ratio of close to 50%. They make profit by managing the trade, by keeping losses short and letting profits run. A system with a high win ratio is not necessarily better and may be too good to be true.

5. Stop/Limit Orders - Check that the strategy method uses stop orders. A stop order should be set to minimize your loss in case the trade does not go in your favour. With no stop order set you could face a huge loss.

6. Paper Trade - Prior to trading any strategy method with real money you should paper trade it, or trade it with a demo account. This will give you an opportunity to get used to the strategy method until you feel comfortable with it, and give you an idea if you should trade it with real money. Often systems can also be back-tested to give you an idea of how the strategy method performed historically.

7. Timing - Check what time commitment the strategy method requires and study if this will fit in with your schedule. You should also check when you need to be at your computer to trade the strategy method.

8. Money Management - What kind of money management strategy method does the strategy method use? Systems that recommend you double up after a loss are not generally recommended by the trading community.

9. Additional Costs - Check what additional costs you might incur to run the strategy method. Does the strategy method require a specific charting package or data feed to run?

10. Refund - Check if a refund is offered and what the conditions are and if they can be met easily.

Good luck with your forex system comparison.

Article Source: http://ezine-articles-planet.com

Jon is the owner of iBlogForex, a blog about every aspect of the Forex market including Forex System Comparison

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