How To Trade Using Mechanic Approach? Part 2
How to choose the mechanic system?
You should choose system which yields good results at testing for the long historical data. Then you can hope and expect from it approximately the same profitableness in future in case you will trade this system for sufficient time.
One of keys to success is the greatest possible diversification for your capital on the markets and, probably, on time windows. In the presence if the capital is less than $50,000 it is optimum to choose rather long-term systems and to be diversified only on the markets. One system should be enough; however there is nothing bad in trade of several systems in the different markets. If at you more than $50,000 you can start to consider a question on addition of the systems diversifying your capital and in shorter time frameworks.
Long-term trade is more effective. At long-term trade you hold winning positions longer and consequently your average profit on one transaction it will be obligatory above, than at short-term trade. If time window is shorter, the less you hold a position and your profit counting on one transaction is less. At the same time trade cost (moving market, the commission and a spread) remains the same. Thus your system has less right to be errorness.
The diversification purpose in short-term trade is additional profit reception during those periods when the market moves sideways in your long-term window. Short-term trade is good also when your system can pass from one market to another in search of the best conditions.
Depending on features of your personal trading you can prefer to use supplementary capital for a diversification in long-term systems or simply opening additional positions in the markets which you already trade. I believe that this approach gives the greatest profitableness in long-term prospect and the greatest return from the available capital. A basis for extraction of profit from available long-term statistical advantage of system is trading in well selected diversified markets and discipline together with bravery in following to the system for a long time.
Almost all traders can’t take to the full statistical advantage from following to trends. They do not trade the systems with religious conviction, they choose bad groups of the markets or risk to much their capital and are forced to leave the market too early.
If you want to participate in forex trading must start from learning the basics of this market to make sure you do not experience problems with this industry.