Best Free Forex Trading Systems
In this article we're going to discuss some of the free Forex trading systems which you can use in your daily FX trading. We'll look at the 4 Hour Scalping Method strategy, the Skyplay System, the Hybrid Scalping System, and the Experimental Breakout/Ranging Double System.
Forex trading should not be viewed as a 'get-rich-quick scheme'. A trader must understand that they will need to invest a significant amount of time and effort into developing the necessary knowledge - and more importantly, they need to learn how to use the different systems needed to succeed in Forex. Forex trading systems vary greatly, and one area with the most noticeable difference is price - as some systems are completely free, whilst others charge hundreds of dollars.
What is a FX trading system?
An FX trading system is what traders will employ to help them to decide whether to buy or sell currency pairs at any given time. The trading system gathers information from a number of trading tools such as charts, signals, news releases, and fundamental analyses. The system can be manual or it can be automated, it depends on the trader's preference. Both ways have their own advantages and disadvantages.
A List of Free FX Trading Systems
We are going to look at some free trading systems which may help you to be more profitable in your Forex career. When researching such systems, it is important to be vigilant and be aware of scams or fraud. Whilst we are going to look at four free systems which we believe traders may find useful, it is ultimately up to you to decide if they are for you, and whether you trust them. Some of the systems will be shown along with the statistics from 2012-2013, because in those years the systems actually came to light, and were tested for the first time.
The Skyplay System
This mechanical trading system was made by utilising the MACD, the Coral Indicator, the 20 EMA, and the Time Zone and True Strength indicators. Technically, the system indicates the trend within a 1-hour time frame by zooming in to the 5 minute chart to define the entry. In addition, the system sets a 25-pip stop, and a 20-pip profit target. The statistics were observed as of December 2012 - March 2013.
Generally, the system had a 3.56% profit across four months, which can be considered as good performance. There are some systems that may have performed better at this time - and it's for this reason that this system may not be regarded as the best free Forex trading system - but this is still a relatively decent result. The average win here was 19.73 pips (0.79%), and the average loss was -23.6 pips (0.94%).
If we take a look at the average win, we might think that the system had performed better if the profit target and the stop-loss were tweaked. The winning trades' score was 44 and the losing trades equals 33, which isn't bad. As for the usability, for the beginner it may be a little bit difficult to look at two different time frames - but if the indicators mentioned above are familiar to you, then it will be no problem to manage with the system.
4H Scalping Method
The next Forex trading system in our list deals with the GBP/JPY currency pair. It has a 4-hour time frame, and no indicators are used. The entry rules are quite simple. You should use the swing highs and lows as scalp lines, and therefore, enter on the break above or below these levels. The stop-loss and the profit target should both equal 50 pips.
We will use the statistical data from February 2012 - July 2013. The system was profitable on approximately 59.52% of its trades, which can be regarded as satisfying enough. Furthermore, the system was able to produce a positive return of 12% over the period it was tested.
At first sight, one can claim that it is pretty good, but if we take into account the duration of the testing period, which was in fact 18 months, this provides us with nearly 0.75% per month, which isn't as attractive. The per trade was limited to only 50 pips/1% - which is not unusual, and is what would be expected. This stop-loss strategy permitted the system to cut losses in the case that the price fell to either the upside, or the downside of the concrete scalp lines.
This free Forex trading system is more newbie-friendly, and much easier to understand, because technical indicators aren't needed here. That being said, the downside of this system, especially for newbies, is that defining scalp lines or swing highs and lows can be too subjective. Novices are more inclined to make mistakes when attempting to establish them.
Additionally, one also has to be permanently monitoring the charts to expect breaks within the scalp lines. Generally, this is an easy-to-use system, and may be more beneficial to those with experience. The specific characteristic of this system is that it is excessively subjective, that in turn implies that it may be impossible to obtain similar results, compared to other traders' results.
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Hybrid Scalping System
This is probably one of the best free Forex trading systems, which makes use of Ichimoku Kinkyu Hyo charts. This system integrates seldom used indicators from other Forex systems, such the Hopwood 10.2 system, and the TMS (Trading Made Simple) system. All the necessary indicators can be directly installed into a MetaTrader 4 trading platform. We will use the statistics from May 2013 here, specifically analysing a 5-minute chart of the EUR/USD currency pair.
We've found that this system has a very high level of profitability. Within a single month it had a huge gain of 46.50%. There were 178 FX trading signals generated for the month, and approximately 50% appeared to be profitable. The maximum winning trade in pips equivalent was: 156 at 7.80%. An even more significant feature is that the Hybrid Scalping System manages risk on an excellent level. The average loss in pips was just 9.10, which is less than the half of the inceptive top loss of 20 pips.
This system isn't as novice-friendly. It is a much more intense scalping strategy with a very different type of charting system. In addition, the Hybrid Scalping system implements a lot of indicators which aren't very well known. This system is probably better for those with more in-depth knowledge and experience within the Forex market.
Experimental Breakout/Ranging Double System
The Experimental Breakout/Ranging Double system consists of two elements - a bounce trade and a breakout trade. It applies only one indicator - the Envelopes indicator. The period tested here was between November 2012 to February 2013. If you are looking at this system in terms of pure profitability over the aforementioned period of time, the system results are quite impressive, with a gain of 18.14%.
Moreover, it was able to do so even though the system only won 6 out of 39 recorded trades. If we try to outline the risk tolerance, we would say that the stop-loss is too tight. The win rate is bounded by the following: 15.38%. As a matter of fact, it loses most of the performed trades due to the 'noise' in the markets. Unfortunately, the drawdown is painfully high : at 16%.
However, the system is quite simple if you follow one simple rule - purchase at the lower band, and sell at the touch of the upper one. That is exactly what beginner traders may be looking for. The only issue that may scare the novices is the use of the Envelope indicator, which is not immensely popular.
We've talked about some of the free Forex trading systems that work which you may utilise in your FX trading. Although they are free, and there is no guarantee of them meeting your expectations, it does not mean that you should ignore them - they can be an extremely useful addition to your Forex strategy. If you would like to learn more about trading systems, make sure to read the following related articles:
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.