No system will ever work for you if you don’t stick to the rules, so remember to be disciplined. You MUST write your trading system rules down and ALWAYS follow them.ĭiscipline is one of the most important characteristics a trader must have, so you must always remember to stick to your system! This is the most important step in creating your trading system. Step 6: Write down your system rules and FOLLOW IT! One more way you can exit is to have a set of criteria that, when met, would signal you to exit.įor example, you could make it a rule that if your indicators happen to reverse to a certain level, you would then exit out of the trade. However you decide to calculate your target, just make sure you stick with it. Others just choose to go for the same amount of pips ( fixed risk) on every trade.
In the chart below, the exit is set at a specific price which is near the bottom of the descending channel. For example, some traders choose support and resistance levels as their targets. How you calculate your target is up to you. One way is to trail your stop, meaning that if the price moves in your favor by ‘X’ amount, you move your stop by ‘X’ amount.Īnother way to exit is to have a set target, and exit when the price hits that target. Some people are more aggressive than others and you will eventually find out what kind of trader you are.įor example, in the chart below, this trader’s entry was when the candle closed below the support line.įor exits, you have a few different options. It’s all really just a matter of trading style. He has been in many situations where he will be in the middle of a candle and all of the indicators match up, only to find that by the close of the candle, the trade has totally reversed on him! One of the forex traders here in, Pip Surfer, believes that it is best to wait until a candle closes before entering. Others like to wait until the close of the candle. Not many people like to talk about losing, but in actuality, a good trader thinks about what he or she could potentially lose BEFORE thinking about how much he or she can win. When developing your forex trading system, it is very important that you define how much you are willing to lose on each trade.
There are many good technical indicators for confirming trends like MACD, Stochastic, and RSI.Īs you become more familiar with various indicators, you will find ones that you prefer over others and can incorporate those into your system. The way we do this is by making sure that when we see a signal for a new trend, we can confirm it by using other indicators. Our second goal for our system is to have the ability to avoid whipsaws, meaning that we don’t want to be caught in a “false” trend. Step 3: Find indicators that help CONFIRM the trend. Of course, there are many other ways forex traders spot trends, but moving averages are one of the easiest to use.
It is also the easiest way to spot a new trend. In its simplest form, moving average crossovers are the fastest ways to identify new trends. This is the basis for what’s known as a “ moving average crossover” system. Specifically, they will use two moving averages (one slow and one fast) and wait until the fast one crosses over or under the slow one. Moving averages are one of the most popular indicators that traders use to help them identify a trend. Since one of our goals is to identify trends as early as possible, we should use i ndicators that can accomplish this. Step 2: Find indicators that help identify a new trend. Even though you will still look at multiple time frames, this will be the main time frame you will use when looking for a trade signal. This will help determine which time frame you will use to trade.
Do you like looking at charts every day, every week, every month, or even every year? How long do you want to hold on to your positions?
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