Top Tips To Help You Evaluate The Performance Of A Forex System

ByVernon L Lees

Expert Author Vernon L Lees

Although you may have a temptation to start trading immediately with a new Forex system, it is wise to carefully evaluate it and carry out some tests on performance before you attempt to trade it on your live account. As you will no doubt want to use the system to make yourself money, then you need to understand what you will be risking in order to do this. Therefore you will need to understand the mechanics of the strategy and be confident in its ability to deliver.

Here are some top tips which will help you to successfully evaluate any Forex strategy.

1. Understand The Strategy

This is fundamental to successful trading. At the heart of every system is a strategy which you will need to become familiar with. The strategy will include a set of rules for you to trade by. These will include when to time your entry, when to exit the markets and any other factors that you need to consider for successful execution. It is important that you understand how these work and that you are able to execute them competently.

2. Find out how the System Has Been Tested

It is important that have some past performance figures for the system so that you know what to expect from its performance. These will need to be thoroughly checked so that you can be sure that they show actual live performance. View them in detail so that you know how to replicate the trading conditions used to create the results, such as lot sizes, accessible markets etc.

3. Test the system yourself

No matter what the results from the vendor show it always pays to try out the system for to validate the performance. Of course at first you won't want to risk your own money to do this. You can instead make use of a demo account which can be opened for free with a Forex broker. This will allow you to follow the strategy and track trading performance with a virtual bank of money.

4. Find Out About Other Traders Experiences

If you want a quick way to find out about a system then visiting a Forex forum is a good way to find out how other people have been getting on when trading with it. You can also often pick up hints and tips on performance and advice on how to trade the system. As always, be prepared to check out any tips on a demo account first to see their effect on performance.

5. Use The Guarantee

Most trading systems that you can purchase these days come with a guarantee. This will let you return the system if you are not happy with its performance. Make sure you don't forget about this as you can be refunded back the initial purchase cost of the system it things don't' work out.

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