FX Trading Systems; the Good, the Bad, and the Ugly

Anyone who goes into FX trading does so with the intention of making a profit. To be able to do this, mastering FX trading systems is key. While there are many different trading strategies available, you shouldn’t try to be a master of all. Purpose of learning a few at a time as you choose which one suits you best.

FX trading systems will give you structure, a plan, and rules to follow. If you are looking to identify the best system for you, read on.

Trading Strategies, Patterns, and Systems

The Good

Here, we’ll take a look at trading patterns that have been proven to work. They include:

1.    Harmonic patterns

This is the art of identifying price patterns in line with retracements and Fibonacci extensions to calculate the financial market’s turning points; feeling lost? Harmonic trading is not simple and calls for practice and time to master. Once well mastered, it can be one of the best, if not the best, trading systems. The reason being, it gives high risk vs. reward ratios. It is also quite versatile and can thus be traded in different markets on different time frames.

2.    Convectional Technical Analysis strategies

This is a very well-known trading system and is also very well traded in the FX community. Technical analysis includes flag patterns, head and shoulder patterns, consolidation breakouts, and ascending triangles, to mention a few. These trading patterns have a proven track record, dating as far back as decades, of working. The downside is that new-age traders find them dull and old-fashioned. They do not present the excitation and glamor gotten by indicator-driven ones.

3.    Price action strategies

This is an excellent trading system as it gives you raw price action data on a chart. The price you will see is the most recent one, thereby being the most accurate. Price action is simple, functional, and practical and works on both changing and trending markets, against and with the trend. If you’re looking to radically increase your FX trading results and simplify trading, learn price action.

There are various price action trading systems. They are:

  • Pin bar: This reversal system is designated to trade markets bottoms and tops. Traders can also use it to buy dips and sell peaks.
  • Inside bar: This is used when you’re trading in strong-trending markets and as a strategy for a trend continuation.
  • Engulfing bar: This rare setup is used for the reversal of trends. It is a strong reversal signal and thus reliable when trend trading. It is typically found at the end of a trend reversal.
  • Fakey setup: This is a trend-based trading approach. It watches an inside bars formation false breakout. It is commonly seen at levels of resistance and support. They are also used to purchase upward trend dips and sell downtrend peaks.

The Bad

When using indicators, you need to proceed with extreme caution. This is because indicators are created by a trader who noticed that they are working at that given time. This is a good thing and a bad thing because there’s no surety that the same will work at a different time.

The biggest problem with indicator-driven FX systems is that a trading signal is generated using indicators instead of PPA (pure price action). Indicators lag and thus give out late and poorer signals as compared to pure price action. PPA’s are often updated chart information.

The Ugly

This is a strategy used by some ‘gurus’ promising zero losses making you lots of money. FX traders who’ve been in the market for some time know that losses are part of trading. There always has to be a loser and a winner. As such, there isn’t a forex strategy available in the universe that guarantees complete losses or wins. To have a clearer picture when presented with such an offer, you should request live trading results as proof.


It is safe to say that as long as you stick to your guns when it comes to an FX trading system, you will go far. When getting an education from an FX trading company, ensure they are using experienced traders and live trading results.