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Forex trading systems are an essential part of forex trading.  You system should include your trading strategy and all the management plans you have for your trading.  This is one of the aspects of the forex market that is unique to every trader.  Forex trading systems that work for one trader may not work for another.  It is important that you know what should be incorporated into your system and how to make the best system for you.

The Strategy You Use

One of the most important aspects of forex trading systems is the trading strategy that you are going to use.  Most traders assume that you are going to be using a strategy that has been tried and tested by many other traders.  While this is one of the strategies that you could use it is also possible to create your own trading strategy.

When you create your own trading strategy you have to be careful and thoroughly test it.  To create your own trading strategy you have to find the timeframe that you are comfortable trading in.  You also have to find the analysis method that you would like to use.  The tricky part is combining the timeframe and the analysis method.  You need to use analysis techniques that offer you signals for your timeframe.

Your Risk Management Plan

The second most important part of your forex trading system is your risk management plan.  This is something that all traders need to have and this will relate to your risk tolerance and financial situation.  There are some traders who are open to greater risks with their trading than others.  However, you have to weigh your risk tolerance against what you can financially weather.

If you are looking at high risks then you have to ensure you are financially able to take the losses that can come.  If you are trading with limited capital then you have to consider whether the high risks are going to deplete your account if you lose on a trade.  If they are then you should consider using lower risks even if you personally have a high risk tolerance.  The fact that you are using limited capital is an indicator that you cannot financially weather high risks.

With your risk management plan you need to set the risk level per trade you find acceptable.  Expert traders state that you should never risk more than 2% of your account on a single trade.  However, if you want to risk only 1% on a trade then you can.

You Money Management Plan

Many traders feel that if they have a risk management plan they do not need a money management plan.  This is incorrect because there is information in this plan that is not part of your risk management plan.  The most important point in this plan is the loss limit you have for the month.

This limit is the maximum percentage of you account that you are able to lose in a month.  Most traders will set this limit at 6% of their trading account.  It is important that you calculate the 6% on a set amount and not what your account is at the moment.