Every mechanical forex trading system consists of a set of chart indicators conforming to a group of specific trade rules. These conditions state when the system will buy or sell a currency pair, based on whether the indicators indicate a formation of a trend or a reversal. The system must also have risk management rules, which provide enough leeway for any possible changes in market factors. Listed below is a simple process in creating a forex mechanical trading system.
The first thing you need to do is choose the time frame in which you will implement your system. Before being able to do so, you must already know if you are comfortable with short-term scalp trades or medium-term to longer-term trades. If you'd like to be in and out of your trade positions within the day, you might want to stick to short-term trading time frames such as the minute or hourly charts. If you like holding on to trades while trends last, you can be a position trader implementing a system on daily or weekly time frames.
The next step has to do with choosing the forex indicators you'd like to work with. You can choose from a set of oscillators or leading indicators, combined with one or two momentum indicators or lagging indicators. These can help you identify and confirm trends that are taking place. In this step, you can also tweak the parameters in order to better filter out fake outs or false signals while at the same time allowing you to catch good trade opportunities.
In the next step, you can now define your entry and exit rules. Just set the conditions for the indicators to predict a new trend and write a clear rule on where exactly you will buy or sell. You can set this at the open or close of the next level or at a specified number of pips above or below previous highs or lows.
The fourth thing you need to do is to define your risk management rules. This can be a certain monetary amount or a percentage of your account. This amount varies per trader, according to his or her level of aggressiveness. Pick an amount that you are comfortable with losing and you are confident that you can recover in another trade.
Lastly, these basic parts and rules of a forex trading system must be written down so that you have a reference. Remember to follow your system rules in order to maintain discipline in forex trading and consistency in decision-making. If you are skilled in coding, you can construct an expert advisor that'd be able to implement the trades on its own.
The first thing you need to do is choose the time frame in which you will implement your system. Before being able to do so, you must already know if you are comfortable with short-term scalp trades or medium-term to longer-term trades. If you'd like to be in and out of your trade positions within the day, you might want to stick to short-term trading time frames such as the minute or hourly charts. If you like holding on to trades while trends last, you can be a position trader implementing a system on daily or weekly time frames.
The next step has to do with choosing the forex indicators you'd like to work with. You can choose from a set of oscillators or leading indicators, combined with one or two momentum indicators or lagging indicators. These can help you identify and confirm trends that are taking place. In this step, you can also tweak the parameters in order to better filter out fake outs or false signals while at the same time allowing you to catch good trade opportunities.
In the next step, you can now define your entry and exit rules. Just set the conditions for the indicators to predict a new trend and write a clear rule on where exactly you will buy or sell. You can set this at the open or close of the next level or at a specified number of pips above or below previous highs or lows.
The fourth thing you need to do is to define your risk management rules. This can be a certain monetary amount or a percentage of your account. This amount varies per trader, according to his or her level of aggressiveness. Pick an amount that you are comfortable with losing and you are confident that you can recover in another trade.
Lastly, these basic parts and rules of a forex trading system must be written down so that you have a reference. Remember to follow your system rules in order to maintain discipline in forex trading and consistency in decision-making. If you are skilled in coding, you can construct an expert advisor that'd be able to implement the trades on its own.
About the Author:
What are the advantages of forex trading and why is it better than equities? This website breaks down the perks of forex trading forex trading.
0 comments:
Post a Comment