Forex Credit

By Forex Euro System

It will be no surprise to hear the best currency trading systems are the ones that make cash! The difficulty is simply the easiest way to identify which those are, and in particular, how to pick which system will be the best for an individual trader, i.e. You. These are the sort of systems that gamblers infrequently call loss recovery systems. The idea is that if your last trade lost, then your next is likelier to win, so you take a larger position. However this idea is completely wrong. Stats disprove it every time. Gamblers lose their shirts on these systems and it’d be mad for a currency exchange trader to employ a system like that. So with that rant out of the way, let’s look at the way to identify a profitable system. To do that we will introduce the concept of edge. Edge is the measure of a system’s returns over a period. Back testing is a good method to get those results. Demo testing is even better because it is nearer to the genuine situation, nevertheless it can take a long time to gather enough results from demo testing so most of the people use back tests which are faster.

Edge is simply the probability of a win multiplied by the average profit on a winning trade, minus the chance of a loss multiplied by the average loss on a losing trade. Results are calculated after taking away the spread and any other per trade costs.