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Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

To trade forex online a trader needs to have a strategy and a trading style. In choosing the right style for himself, a trader must not only consider the time frame of each position, but also the degree of automation involved in each trading decision. Shall we be active in the market at all times, applying a model strictly with little improvisation, or will we trade on a discretionary basis, changing trade sizes, duration and risk controls in accordance with varying market conditions, and manually intervening when circumstances necessitate it? Or will we prefer a hybrid method attempting to combine the benefits of the two different approaches? By understanding how trading systems are classified, we can make the right choices about the suitable approach to trading strategies on the basis of our own requirements and personality.

There are three types of trading systems: systematic, discretionary, and hybrid. This classification holds not only for the choices and decisions of retail and professional individual traders, but also for the trading desks of hedge funds and large banks.

Systematic (mechanical) trading systems
The systematic approach involves the creation of models based on the analysis of data and the formulation of mathematical methods to exploit it. In this approach, the sizing, timing, and risk controls in a trade are based on quantitative or technical methods, and the trader does not intervene in the process, concentrating on optimization and improvement of the model itself, instead of individual trading results. IntelliForex trading strategies portfolio contains several systematic trading systems including IntelliForex Katana, ES3, F1 and others.

Discretionary trading systems
The discretionary approach, on the other hand, performs analysis and creates strategies according to specific market conditions, and opens positions only when predefined circumstances materialize. In this case, the size, timing, and risk controls in each trade are managed separately by the analyst or trader.

Hybrid trading systems
The hybrid approach involves a combination of these two trading systems. In some cases, a trader can maintain two separate accounts each of which employing a different system. One account would run on a discretionary basis, and the other would be systematic, for instance. Many different hybrid systems are possible, and are employed by software developers, traders, and hedge funds. IntelliForex currency strategies portfolio contains several hybrid trading systems including IntelliForex Swing, Intraday Pro and others.

In a study by Elliot Noma, Amal Alibair, and William T. Long of Asset Alliance Corporation published in 2007, it was found that among the 56 largest and most liquid trading programs used by commodity trading advisors in the Barclays CTA index with around $60 billion under management, 40 used systematic methods, 10 used discretionary systems, and only 6 employed a hybrid approach. The popularity of the systematic approach is born of its simplicity, and the high degree of automation involved, which grants traders the ability to isolate emotions from trading decisions.

Variety of Forex trading strategies can be the basis of either systematic, discretionary or hybrid trading systems. Making the right choice at the first stage of choosing the broker is crucial to reach the later stages of profitable trading, and all traders, whether they use the systematic, discretionary, or the hybrid method, need to ensure that they are with the right broker right from the beginning.

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