1. Time Frame
Before you decide creating your own system, the first thing is to decide is what kind of trader you are. Maybe you could be a day trader or a swing trader, you like reading weekly, monthly, everyday, and yearly chart or not.
By asking these questions to yourself you can determine which time frame to be used. Even though you will still look at multiple time frames, this will be the main time frame that you will use when looking for a trading signal.
2. Seek for indicators helping you to identify a new trend
Indicators prove to be the most useful tools in the FX market to forecast the future and identifying the trends. One of the most popular indicators among the forex brokers is moving averages when it comes to identifying the trend. Especially, 2 moving averages are used by the traders (both slow and fast) and wait till the fast one crosses over or under the slow one. This is the basis for what’s known as a “moving average crossover” system.
In its simplest form, moving average crossovers are the fastest ways to identify new trends. It is also the easiest way to spot a new trend.
Of course there are many other ways traders’ are capable to spot trends, but moving averages are one of the easiest to use.
3. Better look for the indicators that help you to confirm the trend
No any trader wants to be caught up in a ‘false’ trend, right? To avoid getting false signals, we have to assure ourselves that when we see a signal for a new trend, we can confirm it by using other indicators. There are many good indicators for confirming trends, but some of the best trend confirmers are MACD, Stochastics and RSI. You can find the best trend software as you are familiar with various indicators, and implement it into your system.
4. Risk Defining
When you are entering the trade, then it is absolutely necessary to decide by yourself on how much you are willing to lose on each trade or how much you actually can afford to lose.
5. Define Entries and Exits
After you’ve decided on whether you are willing to lose on trade or not, then find out where you will enter or exit in a trade to make the most of profit. As for other people, as soon as the indicators are giving a good signal some people don’t even wait to enter the market, whereas some like to wait until the close of the candle.
6. Write down your system rules and follow it!
Ponder upon the rules and write down; get attached to follow them. To succeed in any sort of trading system, proper planning and following it continuously is only the way through which you can make a way to your success. Remember, what you plan; plan it with logic and get stick with it.
