Devising A Forex Trading System – 2 Different Approaches

It's very easy to learn the fundamentals of forex trading and start trading the markets. However it's extremely difficult to come up with just a single trading strategy that will make you money in the long run. So how do you go about achieving this seemingly impossible objective?

Well there are basically two different approaches you can take.

The first approach is to try and come up with a simple trading system that wins more than it loses. In other words you devise a basic system that uses the same target price and stop loss, whether it's 10, 50, 100 or 200 pips, for example.

The major benefit of this type of strategy is that you only need to come up with a system that has a success rate of 51% or higher in order to make money. This is actually quite easy to do because by employing a few technical indicators and / or using key support and resistance levels, you can push the odds in your favor and achieve a success rate well in excess of 50%.

The second approach you can take is to try and come up with a system that uses a tight stop loss but looks for gains in excess of this stop loss. For example you employ a stop loss of 20 points, but target 50 or 100 point gains per trade, for instance.

This is arguably the more reliable type of system because you need a much lower overall success rate in order to make money. Let me give you an example to demonstrate this point.

If, for instance, you employ a stop loss of 20 points but are looking for big price movements of 100 points per trade, then you can make consistent long-term profits with just a 20% success rate. So for every five trades that you open, you could have four losses and just one winning trade because you will still come away 20 points ahead. Obviously if you were to boost the overall success rate to 40%, then you would be able to generate a profit of 140 points from every five trades.

So the point is that there are two main ways you can go about creating your own profitable trading system. You can use the same amount of points for both your target price and your stop loss, and look for a simple system that generates winning trades at least 51% of the time, or you can target greater gains per trade so that you can make money with a system that has a much lower success rate. Both types of system have their merits.

Source by James Woolley

5 Alternative Investment Approaches

An alternative investment is a class of investment that is not covered under any Government regulatory like RBI, SEBI, IRDA, and PFRDA. It refers to a privately pooled investment fund – a trust or a company.

Here are some alternative investments approaches that may influence your investment decisions –

You invest to end up with more money than what you started with. It means you are looking for an absolute return: how much did you actually make, is the main focus.

Invest in assets that you believe will do well; do not invest in a product just because it's likely to outperform the market. Have your analysis on hand.

When it comes to investments, returns are easy to calculate. Keep your focus on Risk involved with the alternative investment asset as well. Prepare a list of the relevant risks. You need to have a clear idea of ​​the risks involved in your investment, as it will help you to take a calculated decision.

Also, if at all something unexpected happens, you will be more likely to make better decisions if you've thought about the risks before investing.

Understand what will influence and drive the returns on your investment. While you hold the investment, monitor the value of your investment.

Constantly revise your requirements of the return drivers of investment, in case they do not match your parameters or expectations rethink your investment.

Anything that's not traditional is alternative. An alternative investment is populated by investment ideas that may not be immediately obvious. For instance cryptocurrency.

Continuing learning, exploring, researching, studying, and looking outside your comfort zone is the key to financial success.

Holding a mix of assets that are equally good, but which behaves differently, will leave your portfolio's return intact, and lower its risk as well.

Diversify means constructing a portfolio with very varied return drivers and risk parameters, not just different assets.

Most of us see investing in alternative investments highly risky. However, if you desire to live a successful and fulfilling life and retire with enough money to enjoy your retirement years, you must take calculated risks. This includes risks in your relationships, risks in your career, and risks in your investments.

While taking smart calculated risks is vital to reaching your goals in life, remember that taking bad risks and losing can set you back, sometimes significantly. It may help, however, to remember that taking smart risks is as simple as making wise decisions.

A Framework for Good Decision-making

I've learned a lot in my life from observing others and through my personal experiences-both good and bad. Therefore, when I consider taking a risk in any area of ​​my life, here are the questions I ask myself:
1. What are the risks? Be honest. Do not let your emotions prevent you from carefully considering all possible risks. This is where the landmines exist.
2. What are the odds of one of the risks coming true? Be truthful. Use real data whenever you can by doing research and talking to others.
3. What are the rewards? Be realistic. Can you really quit your day job and devote ten hours a week to something and make $ 100,000 a year? (Probably not.)
4. What are the odds of those rewards? Be sensible. Find out how many others have done something similar and how they have fared.
5. What other options do I have? Be creative. Do not limit yourself. Consider all possibilities.
6. Do I need to make this decision today? Probably not. Take the time you need to do your research and explore your options.

After you finish answering these six questions, remove the emotions from your decision and ask what your gut is telling you. Also, never forget about the wild card risk; you do not know what you do not know!

Source by Aditi Joshi