What is the difference between a trading system and a trading strategy?
The strategy is a pattern that you observed, that can sometimes predict the movement and gives you a profit.
A system includes the strategy + a price target (take profit) + a loss limit (stop loss). When you add these 2 simples variables you end up with something totally different.
In effect, there are two ways to make money when you are trading.
- You have a very good strategy, you win most of the time (high % hit rate, bigger than 50%). But your profits will probably the same as your losses. You will be doing quick trades to keep that good % winning ratio. You will also be using high leverage.
- You have an average strategy (50% hit rate or less) but when you are making a profit, its much bigger than when you take a loss. You will use lower leverage and your trades will probably run longer.
Take a look at my forex trading strategies page where I talk about the most well known and respected trading strategies.