An Introduction To Trading Systems

An Introduction To Trading Systems


Whether you plan to venture into, foreign (forex) or stock exchange, trading systems will help you become successful in this endeavor. But before proceeding, it is vital first to understand what they are and how they function.


Trading systems pertains to specific rules or parameters that determine points of entry and exit, called signals, for a given equity. They are often indicated on a chart in real time and prompts immediate implementation of trade.


Traders with forex trading charts and graphs on computer screen


In the construction of trading system parameters, the most common technical analysis tools consist of moving averages, Bollinger bands, stochastic, relative strength, and oscillators. Most of the time, a combination of these tools determines a rule. However, there are also instances wherein only one indicator is used in rule creation.


Benefits of a Trading System

Utilizing a trading system provides several benefits to a forex or stock market trader.


Can Increase Profit

Coping with losses is one of the most challenging aspects of being in a forex or stock exchange market account. To recover the money they lose from trading, investors usually make hasty decisions and consequently lose more money in the process.


Since most of these systems are automated, there is no need for the investor to plan, as it is the software that determines when to enter and exit trading. By doing so, losses will be minimized, and there is a greater chance of increasing profits.


Not Time Consuming

Again, since most systems are optimized and automated, the trader need not exert a lot of time analyzing and initiating trades. The system is designed to both generate the signals and perform actual trade.


More Convenient Because They Have Been Optimized By Others

There are a lot of systems that have been developed and currently being marketed. However, availing of the work of other people entails payment of a specified fee. However, you need to be careful when choosing a company because many of them are fraudulent.


Pitfalls of Trading Systems

While they may have their advantages, trading systems are not perfect and present their own disadvantages.


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This is the most significant disadvantage of a trading system. Creating a trading system may require a solid knowledge of technical analysis, the ability to decide empirically, or a comprehensive understanding of the functions of parameters.


While you may not be involved in the development of the system, familiarization with the parameters can be equally challenging.


Requires Realistic Assumptions

For a system to become active, you need to have knowledge of how to differentiate simulated from actual results. This is known as “slippage” and represents one of the major pitfalls in the effectiveness of a system.


Development Takes Time

The task of developing your own system is time-consuming. Getting it to run and work effectively as well as testing it may take some time. Not to mention the fact that you have to make a paper trade in real time to make sure that your system is reliable. The factor of slippage may also come into play, which will require you to revise your system completely.


As mentioned above, you need to be careful when choosing a system. Some firms are out to get your money and offer a system that does not work. However, there are likewise legitimate companies so you should determine the difference between the two.


A trading system can be a helpful tool for novice traders who want to succeed and make a living out of this endeavor.


We hope this information was beneficial. You can have anything you want if you are enthusiastic about putting in the time, effort and plans to get to your goals. Most people know that the wealthy have a secret. Everyone knows that bills take up a lot of the budget. Discover the secrets why the rich stay rich and the poor stay poor. Click Here to view a video with more life tips!


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A Brief History of Stock Market Trading

A Brief History Of Stock Market Trading

Any brief history of stock market or share trading has to immediately start by recognizing that the exact origins are lost in the mists of time. There are conflicting reports that Muslim and Jewish merchants in Cairo were the first to establish a stock market while the traditionalists maintain the oldest ones were actually in Italy and these are usually the starting point when considering a brief history of stock market trading.

The 13th Century Italians almost certainly had the closest share trading markets to what we would recognize today. The Venetian traders were probably the first ones to begin dealing with government securities and even back then there was insider trading going on. In fact as early as 1351 there was a law passed in Venice which was designed to stop people spreading rumors that would drive down prices.

As more formal commerce spread around Europe so did the need to have stock markets. By around the 16th and 17th centuries Amsterdam had begun to become the main stock market in Europe. It was there that the very first company to issue stocks and bonds was formed. This was the Dutch East India Company who issued the first share ever to be sold on the Amsterdam Stock Exchange.

The Dutch as leaders in this new field soon began to develop some of the financial instruments that we are all still familiar with today. They introduced things such as traded options, short selling, unit trusts and even debt-equity swaps which were revolutionary at the time.


After the early success of those Dutch pioneers other countries soon began to see how they could copy this new trading model. Perhaps the most successful were the English with the London Stock Exchange. The LSE even today is acknowledged as the leading stock market in the world.

It was to London that the first American Secretary of the Treasury, Alexander Hamilton, turned when he wanted to begin development of economic power in the New World. Hamilton founded the New York Stock Exchange on Wall Street in the late 18th century where it was joined around fifty years later by what is now the American Stock Exchange. Both the NYSE and Amex remain on Wall Street to this day.

Throughout the history of stock trading there have been many stories of huge successes such as the Dutch East India Company. There have also been many spectacular financial failures. Two of the most notable are the South Sea Bubble and the 1929 Wall Street crash but they all go to make up the fascinating and brief history of stock market trading.

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