There are various things that we want to attain while making a Forex trading system:
• Look for the entry points as quickly as possible
• Search the exit points for attaining maximum profit
• Avoid false exit and entry signals.
If skilled, the three goals mentioned above will help you in creating a gainful trading system. Therefore,, the main question that arises here is to where to begin from?
Selecting a time frame
In this step, you will have to answer yourself like how many hours are you planning to dedicate for trading? Would you like to sit by seeing the machine continuously for several long hours? Are you comfortable with repeated monitoring of the market or are you comfortable by setting the charts one or two times in a day and do not want to switch on the machine for the remaining day? This is regarding the free time and comfort that one has in his or her hand that could be applied in the world of Forex currency, however, while testing one’s plans one might find out information regarding the performance in various frames of time and then select the most perfect and profitable choice.
Selecting the Trading Equipments
There are large numbers of trading equipments and pointers available for the Forex traders but all of them can offer the fastest indication regarding the upcoming opportunities of trading. And, of course, the goal of most of the traders is to attain the deal as fast as they can and enjoy maximum benefit of cost moves. Among the several indicators that could offer the traders a fast indicator regarding the forthcoming variations and possible trading options are indicators like Parabolic SAR, EMA SMA, and Full or slow Stochastic, MACD and many others. Here, the important moment is to understand the main principles of the work to gain maximum profit.
One of the best ways to find a trend setback as quickly as it can be to utilize Moving Averages. Such type of simple scheme as utilizing five EMA or ten EMA crossover will depict the tendency reversal and new opportunity of trading at the earliest stages. Another example is stochastic crossover line or the MACD crossover line. When two different lines cross each other, trend starts to change in an opposite way and new opportunities for entry take place. MACD indicators and Stochastic utilize moving averages.
Associating the indicators on a chart and doing experiments with the pointers values, dealers can make an optimal and a fast way to detect an early trading opportunity.
Selecting a pair of currency and finding the active trading time
Currencies have different behavior or “characters”. Some of them are active extremely like for example, USD/GBP and CHF/GBP, some of them are consistent and stable trending like JPY/EUR or GBP/EUR. Different set-ups for indicator, various values may be utilized to attain the best results for every currency pair. Another great idea is to look for the several hours for a selected pair of currency. Those currency hours are easy to find on a diagram and needs to be utilized to attain maximum gains during the session of trading.
Selecting extra trading equipment to confirm the indicators attained earlier
Once we select a time frame, when the indicators and the pair of currency responds in the best manner it is regarded as the best time to take the important step- searching extra indicators or tools that will confirm the established earlier signals and offer a green colored light for the specific action or save the trader from several fake.
As a authorization pointer, the trader can again use any type of indicator or trading equipment with which he or she is acquainted with. It is suggested to be sophisticated while selecting extra equipment to approve the earlier signal. It can also be the similar indicator but having various settings. For instance, with our starting five EMA and ten EMA crossover process we could utilize extra twenty line of EMA and wait till five EMA exceeds ten EMA and continues through twenty EMA. Or, we can also choose a MACD indicator. This is regarded to be a great Forex trading indicator that reveals lot of important information. Some of the other tools or indicators used for confirming the signals are Stochastic, RSI and Fibonacci. Enhancing and learning dealer can find one that gives rise to best results.
Looking for exit and entry points
Once you have selected the indicators so that one offers and another confirms an indicator, it is considered as the best time to jump and find how far one may move and how much one will earn. A dealer can make an entry as fast as the signal gets confirmation or to find the finest point of entry one can opt for a small time frame and make an entry at the beneficial point.
There are generally two important entry styles. The first is meant for the aggressive trader which offers instant entry without any need to wait for the existing cost bar to close. Another process is to wait till the existing cost bar gets closed and after that make an entry with the following bar if the conditions have not been altered and signal remains to be valid. The method is regarded to be considerate and prevents extra false entries. As far as exits are concerned, the traders can either set a fixed amount that he or she wants to receive per for each trade or utilize the trading equipment that helps to set the goals for gaining maximum profit or utilize the trailing stop after some gains have been attained other than closing an existing point.
Traders can wait for a long time period to attain maximum gain. To safeguard the already made profits, traders utilize the irregular stop, so during the time when the cost makes a positive progress, this irregular stop moves the similar amount as time moves on, protecting the extra gains. If the cost reverts against an open position, irregular stop won’t shift. Another important way to set the protective stops is by placing the stop based on the volatility of the market at any time. For this particular purpose, the traders utilize the Bollinger Band equipment which generates “Corridors” around the cost actions. Wider a corridor, higher will be the activity on a market. Measuring width of a corridor at the time of entering a trade, a trader can set up a protective stop easily and therefore protect oneself from market “noise”.
Evaluating the dangers associated with every trade
This is a golden rule in Forex trading to recognize your danger and rewards involved in every vocation. A thoughtful trader will make an entry to a trade if the risks are twice lesser than the potential rewards. Thus, prior to pushing a button for opening a fresh trading position, a trader should explain point or level in which the trader will shut the trade. Again, certain trading equipment like Pivot Point or Fibonacci tool can offer a clear clue where the gains can be taken and what preparations should be taken while closing the deal. Having such type of useful information on a chart assists in calculating the risks compared to the rewards before entering the world of trading. If the indicators that you select are unpretentious and do not offer such type of indications, simply try to calculate the amount that you can bear to lose and remember to set the order of stop loss once you have started trading.
Demonstrate Trading your own system to find out if it works or not
After this journey and research, it is now time to find out that is the system working or not. Test it, enhance and finally write the steps, rules and settings that you are going to use while trading. After noting all these, now is the time to test. Open the demo account with Forex broker that provides such types of accounts and demonstrate trading your particular system to find how it will react. It is suggested to perform demo trading for nearly three to four months. Among several reasons Forex trading market has various periods in which the behavior changes in a dramatic manner.
For instance, a market doing trending for various months while you test the system, then you decide to open an account but a market decides to replace it to the following stage and begins ranging, moving sideways for an indefinite time period. You have not verified the system under such type of conditions and it will be really disappointing to find that the system does not give good performance in a trending market. There are various reasons like intensive practice and experience that should inspire the traders to demonstrate trading for a long time period.