Professional forex traders follow a minimum of three rules, referred to as a forex trading system. The system is mechanically delivered and is designed to include the strategy for the trader and the Forex Entry Signal, which is the point at which trading will begin. The system will determine the profit target and indicate the optimum Stop Loss point, which is the point at which currency will be sold to minimise loss. Finally, the system will have rules for money management in line with how the strategy is expected to deliver.
Forex trading systems operate within a number of different timeframes. Some, for example, work within a single day, whilst others span a number of days, often between one and four, known as Swing Trading. In addition, different systems offer different risk to reward ratios, that is, the ratio between the potential profit and the potential loss. There are choices too in terms of how to interpret trading signals – experienced traders often use a price action system, however newcomers may fare better with a system that uses indicators instead.