Steps to Create Your Own Trading System in Forex

6 Steps to Create Your Own Trading System in Forex

The main objective of this article is to guide you through the process of developing your own trading system to Trade Forex.

Although devising a system may not take too long, if it can take a long time to prove its effectiveness. So, you should be patient, because a long term a good system of trading you can generate much money.

How create your own Trading System in Forex

Step 1: Time frame

The first thing you need to decide to create your trading system is to know what kind of operator wants to be. Would you like to be 1 day or 1 hour trader? Would you like to see graphics every day, every week, every month or even every year?

How long you would maintain your open positions?

Answering these questions will help you determine which frame time used in your operations. Although in the same way you can analyze graphs with different periods of time, this will be your main time frame, which you will use when you search for signals to open and close positions.

Step 2: Choose indicators that will help you identify a trend

Given that one of our goals is the identification of trends as soon as possible, we use indicators of technical analysis that can achieve it. For example, moving averages are one of the most popular indicators that operators use to identify trends. They are typically used two moving averages (a slow and other fast) expects that the fast across to the slow above or below. This is the basis for what is known as crossing moving averages-based system.

Of course, there are many other ways to find trends, but crossing moving averages are one of the easiest to achieve this.

Step 3: Find indicators that confirm the trend

The second objective for our system of trading for Forex is that it has the ability to prevent false signals and thus avoid falling into false trends. The way to do this is making sure that when we see a sign of a new trend, we can confirm it using other indicators.

There are many indicators confirming trends, like for example: MACD, stochastic and RSI.

As you feel more familiar with the indicators, you will find some that will want over others and that you can incorporate them in your system.

Step 4: Define the level of risk

In developing the system, it is very important that you define how much you are willing to lose in each operation. A very few like to talk about losing, but in reality, a good operator think first what can eventually lose before you think about how much that can win.

The amount of money one is willing to lose is very different from one trader to another. You have to decide how much space is sufficient to enable your operations breathing, but at the same time, not risking much in a single operation. In following lessons we will explain more details on the administration of the money (money management). The money management plays a large role in how much risk that you should give to each operation.

Step 5: Define inputs and outputs

Once you've defined how much these willing to lose in a transaction, the next step is to discover where place the closing of a transaction to get the maximum possible benefit.

Some people like to go as fast as they can in a trend when its indicators give a good signal, even when the sailing has not been closed. Others like to wait until the end of the candle.

According to my experience I think it is better to wait for the candle close before making an entrance. I have been in many situations where I am in the middle of the candle and all my indicators are engaged, only to discover that at the end of the candle, operation turned against me.

But you can have a different view when you have some experience. It is really only a style of operating. Certain people are more aggressive than others and you should go slowly giving your account type of trader are you.

For closings or market outlets, there are different options. One way of doing a close is to place a stop-loss; this means that if the price moves to your advantage in "X" amount, move stop loss for this "X" amount.

Another way is to determine a level and exit when the price reaches that level. As to determine that level, it is up to you. Some people choose to support and resistance levels to do so. Others only choose the same amount of pips in each operation. Way, calculate the target level is your thing, just be sure that it is the optimum for you and hold on to the. No matter to pass, never leave before.

Another way to go, is to have a criterion, that you a signal that will allow you to exit. For example, you can create a rule that, when your indicators are marked a certain level, you come out of the operation.

Step 6: Type system rules and comply with them

This is the most important step when creating your trading system in Forex. You must write the rules of your system and always follow them. Discipline is the most important characteristic that a Forex trader must have, so always stay true to your system! Only in this way you can detect possible errors and improvements but step by step, test, returns to try, take conclusions and make small changes without drive you crazy. If you are continually changing system without giving a certain margin is impossible that you know what works and what does not. No system will work for you if you do not follow their rules, so remember to be disciplined!

How to test your system?

The fastest way to test the effectiveness of your trading system is to open an account with an online broker. You can access the trading platform and charts where you can go back in time and move the chart forward slowly to see if your system had worked well. Ideally, move forward vela to sail. When you move the chart candle to candle you can follow the rules of your trading system and analyze what would be the result of your operations accordingly. You can record the history of your operations and be honest with yourself.

Save the lost profits, average earnings and losses. If you are happy with the results try your demo account system during a reasonable period of time. A period of at least two months is recommended. This will give you an idea of how you can operate your system when the market moves. You must believe me there is a big difference when operas live, when only you do tests.

After a couple of months of operating in demo, you can realize if your system is reliable for the market and go to use your system in a real trading account. At this point, you must you have confidence and feel comfortable with your system to open operations without hesitation.