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FOREX trading tutorials - Forex Trend
Trading Systems
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In this tutorial we will discuss
some Forex Trend Trading Systems.
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Forex
Trend
Following Systems
The most basic of systems sometimes perform
more consistently and profitably than complicated systems that involve
complex indicators and multiple setup and trigger points. Especially
when you are starting out with trading forex and looking for a system
that will perform reasonably, starting with a simple system is often a
good idea. It is always possible to refine and improve a strategy, but
starting with a simple system has a good chance that it will perform
well into the future. As with all systems, it is recommended that you
paper trade or trade using a virtual account to get comfortable with
the system before trading on a live account. Also, some markets have a
greater tendency to trend than others, so it is also a good idea to
look at the characteristics of the particular currency before selecting
a system.
Two Moving
Average Crossover
The two moving average crossover system is perhaps
the simplest trend following forex trading system. It is always in the
market and is sometimes called stop and reverse, as the system will
indicate that you should either be in a long position or a short
position. The two moving average crossover forex system works with a
short or fast moving average and a long or slow moving average. The
idea is that when the short term moving average crosses above the
longer term moving average the system indicates a long trade. If the
market is trending strongly, the shorter term moving average will stay
above the longer term moving average. Once the short term moving
average falls below the longer term could indicate that the trend is
losing momentum and the system would indicate to stop and reverse, i.e.
exit the long positions and enter short positions.
The values to use for the short and long term moving averages depend
somewhat on the trading timeframe. For example if the system is to
follow longer term trends, a 200 day moving average would be
appropriate. The shorter term moving averages are generally half or
less the value of the longer term. A trading system with a shorter
trading timeframe, may use a 26 day moving average for the longer term
and a 9 day for the shorter term. The exact values are not critical,
they just need to fit into your trading timeframe, and backtested so
that you have an idea of how they work.
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