As a trader, having an honest trading system is extremely important, because it allows a trader to save lots of time on a day to day when trading. It also allows a trader to be only make decisions supported a platform that has been backtested using various parameters.
- SET THE TIMEFRAME
Every trader has specific timeframes that they trade with. Some are perfect trading with hourly charts while others are perfect when trading half-hour charts. To select the timeframe, you would like to assess yourself to know the sort of trader you’re.
- SELECT INDICATORS
After setting the timeframe, subsequent step is to pick the indications to use. As each day trader, to accomplish the primary goal mentioned above, we propose that you simply use moving averages. You should use two moving averages, one fast and another one slow and wait until the trick crosses the slow one. This is an idea referred to as moving average crossover.
- FIND INDICATORS TO CONFIRM THE TREND
In this stage, you merely want to fulfil the second goal we mentioned above (avoid whipsaws). You want to avoid being during a false trend, thus the necessity to verify the trend. To achieve this goal, we propose that you simply use MACD, Relative Strength Index, and Stochastic.
- RISK ASSESSMENT
No system is accurate. Therefore, it’s important to define the danger that you simply shall use. Some trades will go against the system. It is thus important to define the quantity of risk you’re willing to require on every trade you enter.
- ENTRY AND EXIT POINTS
After following the above steps, the ultimate step is to define the entry and exit points.
There are many theories on the way to make this happen, however most of the people believe entering the trades when all the indications match up even before the candle closes. Other people, instead, prefer seeing all the traders match up and wait until the candle closes up.