Free Articles on Investments and many other topics
Another free Investments article for you by Monica Hendrix
Titled: Automated Forex Trading Systems - Common Errors That Will Wipe Out Equity Get the Investments category RSS Feed

Automated Forex Trading Systems - Common Errors That Will Wipe Out Equity

Article Summary: If you want to use an automated forex trading system there not all created equal and most will lose you money. This article is all about picking a forex robot for long term currency trading profits...

If you want to use an automated forex trading system there not all created equal and most will lose you money. This article is all about picking a forex robot for long term currency trading profits...

1. Is the Track Record Real

First you should pass by any system that presents a track record with this disclaimer on it.

"CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".

This means the system is presenting a track record which is simply paper profits devised using back data - keep in mind you don't have the luxury of knowing the closing prices!

This gets rid of the vast majority of automated forex trading systems.

2. Get Some Evidence of Sound Logic

Past track records don't guarantee future results - but at least they give you an idea the forex trading system is based on sound logic.

Look for an audited track record of 2 - 3 years, supported by account statements.

3. Can You Handle the Drawdown?

All trading systems lose at some time so check not just the average loss but the worst loss i.e the worst peak to valley drawdown and time to recovery. Does that fit your risk criteria?

Always assume your worst drawdown is ahead of you.

4. Understand the Logic

You are going to have to follow the system with discipline and you will only do this if you understand how and why the system works and can have confidence in it. If you don't have the confidence to follow your system you don't have one!

5. Simple Systems are Best

They work far better than complicated ones as they have fewer elements to break in the brutal world of currency trading normally go for ones that have just a few rules and trade all markets and all market conditions with the same parameters.

6. Use a FREE One

There are free systems you can use that will beat 95% of the systems sold and we are huge fans of Richard Donchian's 4 Week Rule.

It's simple, it works and it has been used by some of the top traders of all time. We don't have time to describe it in detail in this article simply see our articles on it.

An automated forex trading system can make you money - but you have to be very careful in your selection. Make sure you understand it and have confidence in it, so you can follow it with discipline and achieve long term currency trading success.

Article Source: http://www.upublish.info

About the Author:
Monica Hendrix
NEW! 2 X FREE ESSENTIAL TRADER PDFS & MUCH MORE! For free 2 x trading Pdf's with 90 of pages of essential info on Forex Trading Systems visit our website at: http://www.learncurrencytradingonline.com.