When we review Forex trading methods and courses or Forex robots and signal services our goal is to be certain they meet a specific set of criteria and to measure each product against those criteria before passing judgment.
The reason for this is not all Forex products are created equal – in fact, many of the courses and automated systems out there are designed to make money for the creator of the product, not to make money for the Forex trader.
With the explosion of Forex trading products that have hit the market in the past year, it is more important than ever, for Forex traders to do their homework before spending their money on that program that promises to turn $10,000 into $150,000 in just thirty days.
We’re seeing a significant rise in these types of claims – and Forex traders would do well to remember that many if not all, of these claims are simply not true.
Here’s an example: Maybe you’ve seen a headline like this:
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“My Brand New Super-Charged Forex Robot Turns $200 into $30,000 in just 5 Days. Get It Now For Just $49…”
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Think about that for a moment — that means in the second week, you would turn $30,000 into $4.5 MILLION — and in the third week, you would turn that $4.5 Million into $675 Million.
And in just ONE MONTH your $200 would become $ 101,250,000,000 (that’s 101 and 1/4 Billion Dollars).
That would make you be the wealthiest person on the planet. All that for just $49.
Do you believe that?
Now we’re the first to admit we’d LIKE to believe it…but we know better.
This is why we develop our standards for reviewing and testing Forex products and why every product must meet or beat certain criteria before we’ll give it a passing grade.
The criteria we use to determine whether a trading method should be considered:
- In-depth, detailed learning instructions
- Trade Opportunity Identification
- Entry Rules / Exit Rules
- Trade Plan and Strategy
- Risk Management (Initial and Ongoing)
- Product Support (Materials and Customer Support)
- Additional Product Tools (Forums, Member Websites)
- Product Guarantee
If a Forex trading method, Forex robot or other Forex course or program does not meet these criteria, we won’t endorse it as worthy of your time or your money. Remember nobody can promise you profits trading Forex (or any other market). If you’re reading outrageous claims, you should avoid the product because there is simply no way they can be true.
We’re tired of seeing traders scammed by those claiming HUGE, windfall profits. The reality is this: Forex trading is risky and you are better off armed with education and a method where YOU are in control of your trading activities.
Automated programs, black box systems, and mechanical or robot systems take control AWAY from you. We argue this is a bad idea and can only lead to massive losses for you over time.
Forex Trading: Is this Forex system worth the money?
Let’s explore each of our criteria and their importance for determining whether or not a Forex trading method, system, robot or program is worth consideration for trading the Forex markets.
In-depth, detailed learning instructions
Any Forex trading product you invest in, whether it is a trading method, course or robot, must provide you with a detailed understanding of how to use it. You should get a detailed explanation of implementing the method (for example), the correct approach for trading with it, detailed examples of the method in use, and the types of trading, be it day trading or end of day trading that are best suited for the method.
Without detailed instructions, Forex traders will find themselves incapable of understanding these key elements and each one is critical to the successful use of a method or robot.
Trade Opportunity Identification
Traders should avoid any Forex trading product that does not or cannot identify the precise conditions that should be present before a trade is considered. These conditions are known as the setup conditions and describe the market, fundamental or technical indications that must be met before a trader can enter the market.
In most cases, we prefer setup conditions that are based on technical indicators that allow a trader to better visualize the potential for a trade to take place. While fundamental trading is acceptable, we see it is much more difficult, with greater opportunity for losses for the average or beginning trader. Trading based on technical indicators will give traders a better overall view of the market at large, the trends in any Forex pair, and a stronger sense of the probable outcome of the trade.
Entry Rules / Exit Rules
Once the setup conditions have been described, any Forex trading method should also provide the exact rules for entering, managing and exiting a trade. No trader should practice a method without these as it leaves too much room for interpretation for the trader and increases the likelihood for mistakes and losses.
Entry rules should tell a Forex trader at what price a trade should occur and provide the simplest of instructions for placing the trade.
Trade Management, which in part falls under Risk Management (ongoing), should provide instructions for managing the trade regardless of whether or not the trade is profitable.
Exit rules should provide step-by-step instructions for exiting a trade, again regardless of whether or not the trade is profitable.
Note that we say whether or not a trade is profitable. Too often, we see methods and robots that tell you what to do when your trade is profitable. Rarely do we see methods that tell you what to do if a trade has turned against you. This should be a simple exercise — if a trade moves against you, you should get out (that’s rather obvious), however, many programs out there do not teach traders the correct way to get out of a trade to minimize their losses on the trade.
You will have losing trades – the critical element to that is to keep those losses as small as possible.
Trade Plan and Strategy
Any method or course for trading Forex must also include a trading plan or strategy. This refers to the daily use of the course to identify trades, whether for day trading or end of day trading, or simply casual trading.
- Some examples of elements traders should look for include:
- Using the setup conditions criteria within charting software
- Planning the amount of time needed to trade (short term/long term)
- Monitoring the trade once it has executed
- When to trade and when NOT to trade
- Best hours for trading certain pairs
- Trading the majors and/or the exotics
Risk Management (Initial and Ongoing)
Risk Management is without question the most critical, yet least taught element to Forex trading. First, we need to establish exactly what we mean by Risk Management. When talking about Risk and Risk Management, we’re referring to both the risk involved in every trading event and the money management principles once a trade has been taken. The primary factors every Forex trader should be aware of are:
- Amount of capital risked per trade, as a percentage of your account balance
- Calculating a reward to risk ratio before entering a trade and for the duration of a trade
- Calculating the correct Lot size and Position size for each trade entered
- Initial stop loss settings for each trade entered (based upon above factors)
- Ongoing stop loss management for the duration of a trade
- Managing the profit exit of a trade
A brief overview of the importance of each of these elements:
Typically, the initial risk for any trade should be limited to 2-5% of your account balance. This means you will automatically limit the amount of capital you could lose on any single trading event. If a trading method does not trade within these guidelines, or presents wider guidelines, you should be very careful in the application of that method. You may also consider avoiding it altogether.
Every trade should operate from a reward to risk ratio, however, don’t fixate yourself on this number. Instead, you should be looking for methods that REDUCE risk and have a higher probability of reward.
The initial risk on a trade will help you to determine the correct lot size and position size for any trade you are going to enter. Note the distinction between the two: if your account balance is $500, you are not going to be able to trade a standard lot. You’ll likely be trading micro or mini lots and you’ll need to be able to determine the correct number of lots (position size) to trade based on the amount of capital risked on the trade.
Stop loss management is critical to the success of any trade. First a method or program should clearly set out the initial stop loss placement, based also on the amount of capital risked on the trade, and then, provide ongoing stop loss management for the duration of a trade. This may include trailing stops, or, a simple exit strategy once a profit target has been hit.
Last, a method or program must show you how to manage that profit – especially if you are scaling out of a trade in multiple stages. Too many programs leave this one category in the trader’s hands and guarantee more failure than success for the trader. The reason for this is once trades go profitable, traders fall into the ‘greed’ trap. They’ll want more pips than the market is willing to give them, or, worse yet, when a trade hits a high and then reverses, traders will stubbornly wait out the market to get back to that previous high (or maximum profit) only to see all of their gain evaporate.
Far too often we see methods and robots that fall into these categories:
- No risk management guidelines taught in conjunction with the product
- Stop loss settings that are too wide and lead to massive draw downs
- No money management principles for lot/position sizing
- No guidelines for managing risk and protecting gains once a trade is entered
Don’t make the mistake of trading with a method or program that does not provide exact guidelines for managing all of the elements of Risk and Money Management principles.
Product Support (Materials and Customer Support)
This is as simple as it gets – when you purchase a Forex trading method or Forex robot, you need to have world class support. It doesn’t matter whether that is telephone support or email support – be certain that an outlet exists to answer your questions or solve your problems.
One warning sign and how to test it: As soon as you purchase a Forex trading method, course or robot, send an immediate email to their support team. This can be as simple as asking questions about the setup of the program, or verifying the return policy. The key is to see how long an answer takes; or, if you even receive an answer – we’ve run across many products that don’t even respond to their customer’s emails!
Additional Product Tools (Forums, Member Websites)
Generally speaking, the Forex trading product should have additional outlets for help, whether those outlets are forums or member’s only websites. Here traders should have access to additional information that assists them in utilizing the method or program and provides other resources or training information on putting the method into practice.
While we do not necessarily black mark a method or program that does not have a forum or member’s website, those that automatically include one rank higher in our reviews.
Product Guarantee
In most cases, you’ll find Forex trading products come with 30 day money back guarantees. We prefer companies that give you more than 30 days to test their product. Why?
First, you need time to understand how the method or program works. While you may be able to get through the learning portion of a method in a few days, you still need time to test it until you thoroughly understand it and are able to put it to full use.
Second, we advocate always trading with a new method or program on a demo account until traders have complete confidence in following and implementing ALL of the rules – from setup condition identification, trade entry and exit, to risk management.
Traders should never move to live money account trading until they have that confidence.
Furthermore, you need time to ensure that a forward testing of the product produces positive results. By positive, we do NOT mean that every trade is a winner – this is impossible – but we do mean the overall trading activity results in net gains.
While traders can accomplish this in a 30-day period, it puts far too much pressure on the outcome of every trade. Traders are forced toward that ‘every trade’ should be a winner mindset, especially as they get closer to the last few days of the guarantee period. This causes discipline mistakes as traders take greater risks, enter trades they should not, or trade during times when the market is moving against them.
The shorter the guarantee period, the more suspect the product, in our opinion. Again, this is due to two factors: one, the learning curve and two, the forced pace at which traders feel the need to trade profitably. As well, the shorter period is designed to limit the exposure to the markets for programs that do not fare well over time — especially automated programs, robots or
scalping programs.
By reducing the market time exposure, the makers of these programs hope to ‘hide’ the short term likelihood of a massive loss due to the lack of risk management principles.
Back testing: A quick note on back testing — where it relates to automated programs like robots or other ‘cheap’ trading methods, you should be aware that such programs are often CREATED from a back tested theory. That means the system maker used old market data to form a method and let history ‘prove them right’.
Since that’s the case, what are the chances you’ll discover something doesn’t work when back testing it? Not all that high.
You are better served by forward testing with real market conditions in a demo account (even if the product has only a 30-day money back guarantee) as that testing will give you far better accuracy in terms of the ability for the method or program to generate successful trades.
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