Escon deOjo's Forex

If we take a scalping system that makes an average of twenty pips on a profitable trade and loses a standard 30 pips on a losing trade, with eighty percent of its trades being profitable and only twenty percent losses, this is the edge for this system:

Edge = (80% x 20 pips) – (20% x 30 pips) = 10 pips

That would be a profitable system and a really good one to use if you were interested in becoming a scalper. For instance, you could come across a system that worked the other way, with plenty of little losses, say 60% losses of ten pips every time, and then some bigger gains, making say 40 pips average profit on successful trades. For this system,

Edge = (40% x 40) – (60% x 10) = 10 pips

So these two totally different systems have the same results, and the decision on which was the best forex trading system for you’d be entirely dependent on your trading style. A good way to check this out would be to operate both systems in a demo account, say for one month each. At the end of the month you might investigate the theoretical results from a back test over the month to discover how your own results sundry from the back tests. This would give you an idea of how successful you’d be operating that system in reality. Comparing with back test results for a similar period would stop you from throwing out a system just because it happened to have a bad month. This could be a handy comparison when selecting the best forex trading system from numerous systems that are rewarding in theory..