When creating your own trading system, there are a few things to keep in mind. Your trading strategy needs to be able to spot new forex market trends, while at the same time making sure you do not to get faked out/whipsaws. The real trick is, once you have created a trading system that works for you, stick to it. Being disciplined will help you a lot in becoming successful in forex trading.
Before trading forex on a live forex account, you have to figure out what trading strategy works for you. It is good to know in what forex chart time frame you are going to be working in, and how much you are willing to risk once you begin forex trading online. All these factors should be factored in, and should be written down within your Forex trading plan. A good place to test this forex trading plan would be on a free demo practice account. This is where you test your trading strategies risk free without investing money to determine which trading strategy is best suited for you.
So, now how can a Forex trader like you come up with a "good trading system" or the "best trading system"?
To come up with a good trading strategy the first thing to do is to define your objective or goal:
The following example illustrates a goal and explains the forex trading rules of how to achieve that goal
Goals - Trading System Goals
1. Identify a new forex trend
Moving average crossover method trading strategy is the most commonly used strategy to identify a new forex trend. The time to open a long or short trade is determined when two moving averages indicators cross over or cross under each other.
2. Confirm the new forex trend
Relative Strength Index(RSI) Indicator and Stochastic Oscillator Indicator are the most commonly used trading indicators to confirm a Forex trend.
Indicator based Trading System
The best type of a forex trading method is one that is indicator-based. You will find it straightforward to generate the forex signals and thus less error-prone on your part and this will help you to avoid forex market whipsaws.
There are several things we want to achieve when creating a trading system:
- Find entry points as early as possible.
- Find exit points securing maximum gains.
- Avoid fake entry and exit signals.
- Proper Forex Money Management Rules
Accomplishing these four goals will result in a profitable trading strategy that works.
The last piece of information needed, is deciding how aggressive you are going to be when entering and exiting a forex trade. Those forex traders who are more aggressive wouldn't wait until the forex chart candlestick closes and would enter as soon as their indicators match up. But most forex traders would wait until the forex chart candlestick of the chart time frame they are using has closed, to have more stability when entering a the market.
To get profits out of the forex market you need to build your own profitable trading system; a trading method that will generate profitable forex signals. You need to have your own trading strategy that will help you achieve your financial goals. Sometimes the best Forex trading systems are the ones that you build on your own. No need to keep searching online for the best Forex systems or for Forex trading systems that work, this website provides you with all the forex tools required to help you and guide you on how to come up with your own forex systems.
Below is an example of a forex trade system based on RSI, MACD and Stochastic.
Trading System - MT4 Templates Trading Systems
The trading system example above is comprised of four technical indicators in total, all of these generate forex trade signals using different methods, the moving average will generate forex signals using the moving average crossover method shown, the RSI indicator, Stochastic indicator and MACD indicator use different technical analysis to generate the long and short signals as shown in the above example. How to generate these forex signals is discussed in the next topic (on the sidebar navigation learn forex lessons menu under key concepts).
For beginner forex traders, it is difficult for them to create their own Forex strategies since they do not have much knowledge about the forex market. However, this learn forex trading website will explain how a beginner forex trader can create their own free Forex trading system in just seven easy steps. The best strategy is the one you come up with yourself and learn how to trade the forex market with it.
The main advantage of creating your own free Forex trading systems is that you will know how to trade with it and make profits by yourself - and not rely on other peoples efforts.
In the next forex lesson located at the sidebar navigation learn trading lessons menu below the forex key concepts will show you how to create a trading system like the one above, write it's forex rules and how to back test the trading system on a practice forex demo account before using it on a live forex account.
4 Examples of Free Trading Systems - MT4 Templates Trading Systems
Example 1: The Moving Average Crossover Method - Trading Strategy
The moving average indicator cross over method uses two moving averages to generate forex signals. The first Moving average uses a shorter period and the second is a longer period moving average.
Moving Average Crossover Method - Moving Average Crossover Trading Strategy
This above forex trading method is referred to as the moving average crossover method because forex signals are generated when the two averages cross above or below each other.
Forex System Trading Example - Short and Long signal Generated by Trading System
A buy forex signal or going long trade is generated when the shorter moving average indicator crosses above the longer moving average indicator (Both Moving Averages Going Up).
A sell forex signal or a going short trade is generated when the shorter average indicator crosses below the longer moving average indicator (Both Moving Averages Going Down).
Example 2: Stochastics Trading System - MT4 Templates Trading Systems
Stochastic Oscillator indicator can be combined with other Forex indicators to form a trading system.
- RSI indicator
- MACD indicator
- Moving Averages indicators
Trading Systems Forex Example - MT4 Templates Trading Systems
Short Signal or Sell Signal
How the short sell forex signal was generated
From our forex trading rules the short signal is generated when:
- Both Moving Averages are heading down
- RSI is below 50
- Stochastic heading downwards
- MACD heading downwards below center-line
The short signal was generated when all the written forex trading rules were met. The exit signal is generated when a forex signal in the opposite direction is generated.
The good thing about using such a forex trading method is that we are using different types of technical indicators to confirm the forex signals and avoid as many forex whipsaws as possible in the process.
- Stochastic - forex momentum oscillator indicator
- RSI - forex momentum oscillator indicator
- Moving Averages - forex trend following indicator
- MACD - forex trend following oscillator
Based on the forex chart time frame used - this strategy can be used as Forex scalping system when the minute forex charts are used or as a Forex day trading system when hourly forex charts are used.
Example 3: Trading System Forex Example
This trading system is fully explained within the Forex trading plan on the Forex trading plan tutorial on this learn forex trading website under the Forex key concepts section located on the right navigation menu.
Forex Chart Time frame
1 hour forex chart
Indicators that identify a new forex trend
Moving Average Crossover Indicators Strategy
Indicators that confirm the forex trend
RSI indicator
STOCHASTIC OSCILLATOR indicator
Long Entry
1. Both MA(moving averages) pointing up
2. RSI above 50
3. Both stochastics going up
Short Entry
1. Both MA pointing down
2. RSI below 50
3. Both stochastics going down
Exit
1. MA Indicator gives opposite signal
2. RSI gives opposite signal
Risk Management
Stop loss- 35 pips
Take Profit- 70 pips
Reward to Risk 2:1
Example 4: New Gann Swing Chartist Plan - MT4 Templates Trading Systems
The Gann Swing Oscillator is meant to be used in combination with the Gann HiLo Activator and Gann Trend to form a complete Forex strategy commonly referred to as the - "New Gann Swing Chartist Plan". Within this methodology the Gann Swing Oscillator is used to help determine forex market swings for trading only within the current market trend is shown by the Gann Trend.
Below is the example of the New Gann Swing Chartist Plan
The Gann Chartist Plan - Trading Systems - MT4 Template Trading System
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