The Forex (FOReign EXchange) market appeared at the end of the 1970s after many countries decided to unpeg their currency value from that of the US dollar or gold. This led to the formation of an international market on which currency could be exchanged and traded freely. Today, Forex is the largest financial market in the world. It doesn’t matter where you live or even where you are right now; as long as you have access to the Internet, a trading terminal (a special program for trading Forex), and an account with a Forex broker, all the instruments and opportunities of Forex are available to you.

FX or Forex describes the Foreign Exchange Market, a marketplace where the world’s various currencies are traded. Its huge volume and fluidity made the Forex market the largest and most significant financial market in the world, with well over $6 trillion traded daily which is almost 10 times larger than the stock market. Due to the fact that forex currency trading has no centralised marketplace, currencies can be traded in whatever market is open at any given time, creating a great opportunity for traders to buy and sell currencies around the clock 24 hours a day, 5 days a week with the exception of weekends.

A forex trading system is a structured approach that guides traders in making informed decisions about when to enter and exit trades. These systems are based on specific rules, indicators, and risk management principles. Here are the key aspects of designing and understanding a forex trading system:

Time Frame

The first step in creating a trading system is to determine your preferred time frame. Are you a day trader, swing trader, or long-term investor?

Your chosen time frame will influence how often you analyze charts and execute trades.

Trend Identification:

To identify trends early, traders often use moving averages. These indicators help spot changes in price direction.

A common approach is the moving average crossover system, where traders use two moving averages (one fast and one slow). When the fast moving average crosses over or under the slow one, it signals a potential trend change.

Automated vs. Manual Systems:

Others use automated trading systems (often called Expert Advisors or EAs), which execute trades based on predefined rules.

Forex Trading Example

Selling EUR/USD
Leverage 1:500

Opening the Position