Technical Trading System

Abstract

Technical trading system is one of the types of the two trading systems recognized. This system depends mainly on technical indicators as well as techniques in charting.

A trading system alternatively known as a trading strategy may be referred to as a plan, which governs trade. The trading strategy ensures that a trader may be able to avail the maximum benefits and incur the minimum loss in a trade. There are several parameters, which defines the entry and exit of a trade. Trading systems help in ascertaining the "price movement of currency". Trading systems are very helpful as it helps a trader in deciding as to when a trader is to exit a trade, hold on to the trade or enter a trade. An efficient and effective trading system goes a long way in determining success of a trade.

Two types of trade have been recognized. They are:

Technical trading system

Fundamental trading system.

Technical trading system:

Techniques in charting and technical indicators are mainly banked on in technical trading system. The price movements are reflected in the charts. Data is collected from technical indicators. The price movements decide the parameters.

There are times when technical indicators are combined so that the parameters may be determined. Technical trading system is usually made use of by:

Range traders

Trend traders

Types of traders employing technical trading system:

Traders indulging in range trading

Traders dealing with trend trading.

Advantages of technical trading system:

The technical trading system is not so expensive and can be used by reliably and easily. They are the most basic tools, which a trader can lay his hands on.

Disadvantage of technical trading system:

The main disadvantage of technical trading system is that this system fails to respond in times of calamities or unexpected events.