The Secret to Creating Your Own Forex Trading System (3)

In the previous article you already know the steps that must be followed in building a forex trading system , in this case is a mechanical trading system. There are at least seven steps that must be done starting from planning to testing the trading system.

In this closing article I will try to provide an easy example of a simple trading system based on the exposure described in the previous article.

Setup:

  • Time frame: Daily (D1)
  • Trend indicator:
  1. Simple Moving Average (SMA), period: 20
  2. Simple Moving Average (SMA), period: 50
  • Confirmator indicator:
  1. Stochastic (5,3,3)
  2. RSI (14)

Trading Rules:

Entry Rule:

  • BUY rules:
  1. 20 SMA has cut above SMA 50 (golden cross)
  2. Make sure both high schools point up
  3. Wait until the correction occurs to the area between 20 SMA and 50 SMA, then look for bullish signal from stochastic
  4. Confirm the stochastic bullish signal with RSI, make sure the RSI value is above 50 but not overbought yet
  5. If all of the conditions above are met, open long positions
  6. Place a Stop Loss as far as 2000 pips (5 decimal places) from the OP
  • SELL Rules:
  1. 20 SMA has cut down 50 SMA (death cross)
  2. Make sure the two high schools point down
  3. Wait until the pull-back occurs to the area between 20 SMA and 50 SMA, then look for bearish signal from stochastic
  4. Confirmation of the bearish stochastic signal with RSI, make sure the RSI value is below 50 but not oversold yet
  5. If all of the above conditions are met, open short positions
  6. Place a Stop Loss as far as 2000 pips (5 decimal places) from the OP

Exit Rule:

  • Close long positions if 20 SMA and 50 SMA form death cross, or if the RSI value falls below 50, or if Stop Loss is touched.
  • Close short positions if SMA 20 and 50 SMA form golden cross, or if the RSI value rises above 50, or if Stop Loss is touched.

Now, let’s see how the illustrations are applied.

Keep in mind that this trading system uses a daily time-frame, so it actually tends to the long-term trading style. Therefore, it is only natural that in the example above the transaction made could reach profits of more than 13,000 pips!

Patience is key. Back to the concept of mechanical trading system , indeed emotional factors should not be too involved in the decision making process. Buy, sell and close your position only if there is a valid signal that has been confirmed.

Well, the trading system that I described is just an example. You are free to modify or even create your own trading system that is roughly in accordance with your trading character and style by following the steps that have been described starting from the first part of the writing, the 2nd to 3rd sections .

Good luck and good luck.

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author
Forex Signal 30 is the best forex system since 2009 and has been used by thousands of traders from around the world to generate profit in forex trading. This system is created by our team of Brilliant Forex Signal Team, this system is made as simple as possible for beginner and professional traders.
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