Chapter 2 Five Steps for Successful Creation of a Trading System
In developing your own trading system, you should have goals for your trading system. Your goals should have these two important things:
1. Your trading system must be able to determine the trend as early as you possibly can.
2. Your trading system must be able to avoid you from breaking into two. That means going broke.
The following are five steps in creating your own trading system:
Step 1: Define a time frame for your system
The first thing you need to decide when creating your system is what kind of forex trader you are. This will help determine which time frame you will use to trade. Time frames are generally divided as:
● Long term investing – Monthly
● Mid to Long term trading – Weekly
● Swing trading – Daily
● Intra week Swing trading – H4
● Intraday trading – M30-H1
● Scalp Swings – M15
● Scalping – M5-M15
● Extreme Scalping – M1
● MTF (Multiple Time frame Approach) – H4 H1 M30 or different combination.
Step 2: Pick the proper indicators
Trading systems are based around trading tools. For many, these trading tools are forex indicators. The main purpose of forex indicators is to: define a trend; confirm a trend and entry; place SL and TP.
● Find indicators that help identify a new trend
If you are new in the market you will find it difficult to identify trends, by using the indicators you can find the trends more easily. The most popular indicator is the major average which helps the traders to identify a trend.
To identify new trends, use the moving average crossovers as it spots a new trend in the easiest way. You can also use the other ways to find the trends but the
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