The main objective of this paper is to guide you through the process of developing your own forex trading system. Although not take long to devise a system, if you take enough time to prove its effectiveness. So be patient, because in the long term a good system can generarte lot of money.
Step 1: Time interval
The first thing you need to decide to create your trading system is knowing what kind of trader you want to be. Want to be operator of 1 day or 1 hour? Would you like to see charts every day, every week, every month or every year?
How long would you maintain your open positions?.
Answering these questions will help you determine which time interval used in your operations. Although the same way you will use many types of graphs with different periods of time, this will be your main interval of time, you will use when searching for signals to open or close positions.
Step 2: Choose indicators that help identify a new trend
Since one of our goals is to identify trends as soon as possible, we use technical indicators that can do it. Moving averages are one of the most popular indicators that traders use to identify trends. Specifically, we use two moving averages (one slow and one fast) and waits for the fastest crossing above or below the slow. This is the basis for what is known as "moving average crossover system."
In its simplest form, moving averages cross are the fastest way to identify trends.
Of course, there are many other ways in which operators can find trends, but the moving average cross is one of the easiest to achieve.
Step 3: Find indicators that confirm the trend
Our second objective for the operating system is having the ability to avoid false signals and avoid falling into false trends. The way to do this is to make sure that when we see a sign of a new trend, we can confirm using other indicators.
There are many good indicators that confirm trends, such as: MACD, Stochastics and RSI.
As you feel more familiar with the indicators, you'll find some that you prefer over others and you can incorporate them into your system.
Step 4: Define the risk
In developing the system is very important to define how much you are willing to lose on each trade. Very few like to talk about losing, but in reality, a good operator thinks first of what will eventually be lost before thinking about how much you can earn.
The amount of money you're willing to lose is different in each person. You have to decide how much space is enough to allow your breathing operations, but at the same time not risking much in a single operation. In later lessons explain better money management. Money management plays a big role in the risk that you give each operation.
Step 5: Define inputs and outputs
Once you have defined as those willing to lose on a trade, the next step is to find out where to put the closure of an operation to get the best gains.
Some people like to go as fast as they can in a trend when the indicators are a good sign, even if the candle is not closed. Others, like waiting until the close of the candle.
In my experience I have found it best to wait until the candle closes before making an entry. I've been in many situations where I am in the midst of the fire and all my gauges fit, only to discover that at the close of the candle, the operation turned against me.
It really is just a style of operating. Certain people are more aggressive than others and eventually you will realize what kind of trader you are.
For closures or outputs, there are different options. One way to do a closure is to place a stop loss, this means that if the price moves in your favor for "X" amount, move the stop loss on a single "X" amount.
Another way is to determine a level, and exit when the price reaches that level. How to calculate that level, up to you. Some people choose to support and resistance levels for it. Others, just choose the same number of pips on each trade. Anyway, calculate the level is up to you, just make sure to hold on to it. Whatever happens, never leave before. Stay attached to your system, after all, YOU say you developed!
Another way out is to have a criterion, give you a signal that allows you to leave. For example, you can create a rule that when your indicators are returned at some level, come out of the operation.
Step 6: Write the rules of your system !
This is the most important step in creating your operating system. You write the rules of your operating system and follow them forever. Discipline is the most important characteristic that a Forex trader should have, so be always attached to your system! No system will work for you if you do not follow their gunwales, so remember to be disciplined!
How to test your system
The fastest way to test your system is to find a graphics software where you can give back in time and move the plot along a candle at a time. When you move the plot along a candle at a time, you can follow the rules of your operating system and make your operations accordingly. Save the history of your transactions and be honest with yourself.
Save the profits, losses, average earnings and losses. If you're happy with the results, then you can follow in the next step to test your trading system: Live Trading on a demo account.
Test your live system on a demo account for at least two months. This will give you an idea of how you operate your system when the market moves. You must believe that there is a big difference when you operate in vivo, that when you only do tests.
After two months of live trading with a demo account, you'll find out if your system is reliable for the market. If you are still having good results, you can test your system in a real account. At this point, you should feel very confident and comfortable with your system to open operations without hesitation. At this point, you have succeeded!
related posts
- free indikator forex
- ichimoku system
- forex robot program
- ichimoku trading system
- mtf macd
Step 1: Time interval
The first thing you need to decide to create your trading system is knowing what kind of trader you want to be. Want to be operator of 1 day or 1 hour? Would you like to see charts every day, every week, every month or every year?
How long would you maintain your open positions?.
Answering these questions will help you determine which time interval used in your operations. Although the same way you will use many types of graphs with different periods of time, this will be your main interval of time, you will use when searching for signals to open or close positions.
Step 2: Choose indicators that help identify a new trend
Since one of our goals is to identify trends as soon as possible, we use technical indicators that can do it. Moving averages are one of the most popular indicators that traders use to identify trends. Specifically, we use two moving averages (one slow and one fast) and waits for the fastest crossing above or below the slow. This is the basis for what is known as "moving average crossover system."
In its simplest form, moving averages cross are the fastest way to identify trends.
Of course, there are many other ways in which operators can find trends, but the moving average cross is one of the easiest to achieve.
Step 3: Find indicators that confirm the trend
Our second objective for the operating system is having the ability to avoid false signals and avoid falling into false trends. The way to do this is to make sure that when we see a sign of a new trend, we can confirm using other indicators.
There are many good indicators that confirm trends, such as: MACD, Stochastics and RSI.
As you feel more familiar with the indicators, you'll find some that you prefer over others and you can incorporate them into your system.
Step 4: Define the risk
In developing the system is very important to define how much you are willing to lose on each trade. Very few like to talk about losing, but in reality, a good operator thinks first of what will eventually be lost before thinking about how much you can earn.
The amount of money you're willing to lose is different in each person. You have to decide how much space is enough to allow your breathing operations, but at the same time not risking much in a single operation. In later lessons explain better money management. Money management plays a big role in the risk that you give each operation.
Step 5: Define inputs and outputs
Once you have defined as those willing to lose on a trade, the next step is to find out where to put the closure of an operation to get the best gains.
Some people like to go as fast as they can in a trend when the indicators are a good sign, even if the candle is not closed. Others, like waiting until the close of the candle.
In my experience I have found it best to wait until the candle closes before making an entry. I've been in many situations where I am in the midst of the fire and all my gauges fit, only to discover that at the close of the candle, the operation turned against me.
It really is just a style of operating. Certain people are more aggressive than others and eventually you will realize what kind of trader you are.
For closures or outputs, there are different options. One way to do a closure is to place a stop loss, this means that if the price moves in your favor for "X" amount, move the stop loss on a single "X" amount.
Another way is to determine a level, and exit when the price reaches that level. How to calculate that level, up to you. Some people choose to support and resistance levels for it. Others, just choose the same number of pips on each trade. Anyway, calculate the level is up to you, just make sure to hold on to it. Whatever happens, never leave before. Stay attached to your system, after all, YOU say you developed!
Another way out is to have a criterion, give you a signal that allows you to leave. For example, you can create a rule that when your indicators are returned at some level, come out of the operation.
Step 6: Write the rules of your system !
This is the most important step in creating your operating system. You write the rules of your operating system and follow them forever. Discipline is the most important characteristic that a Forex trader should have, so be always attached to your system! No system will work for you if you do not follow their gunwales, so remember to be disciplined!
How to test your system
The fastest way to test your system is to find a graphics software where you can give back in time and move the plot along a candle at a time. When you move the plot along a candle at a time, you can follow the rules of your operating system and make your operations accordingly. Save the history of your transactions and be honest with yourself.
Save the profits, losses, average earnings and losses. If you're happy with the results, then you can follow in the next step to test your trading system: Live Trading on a demo account.
Test your live system on a demo account for at least two months. This will give you an idea of how you operate your system when the market moves. You must believe that there is a big difference when you operate in vivo, that when you only do tests.
After two months of live trading with a demo account, you'll find out if your system is reliable for the market. If you are still having good results, you can test your system in a real account. At this point, you should feel very confident and comfortable with your system to open operations without hesitation. At this point, you have succeeded!
related posts
- free indikator forex
- ichimoku system
- forex robot program
- ichimoku trading system
- mtf macd
Forex is simple follow the trend and you will rich.
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