Creating a trading system sounds a lot of work. While that can be true for many traders, it can be easier if you have clear and well-defined Global Market steps that you will follow while you’re doing it. In addition, creating a system is much less difficult that thoroughly testing it out.
Nonetheless, creating a great trading system should be one of your priorities, since the better your trading system, the better you can trade. And the better you can trade, the higher is your chance of winning trades.
Set the Time Frame
This has something to do with your trading style. Different traders have Forex Currencies different styles, and with those styles come different time frames. For instance, a scalper may have more time than a position trader since scalpers generally open and close trades within an hour or so while position traders typically wait for several months or years before they exit a trade.
Once you find your trading style and time frame, it will be easier for you to catch trading signals that are based on your time frame.
Choose Indicators Wisely
We all know that different indicators function differently. And because of this, you have to be careful when choosing an indicator that will tell you trading signals. If you look at or use the wrong indicator, you will probably receive inaccurate or misleading trading signals.
And if you act upon those faulty trading signals, then you will more likely end up losing a lot in your trades.
Try moving averages first. These are the most popular indicator that a lot of traders use to help them spot trends and patterns. It’s the easiest one to use, in fact.
Confirm the Trend
Now, it’s not enough that you can spot a trend—or at least believe that you’ve spotted a trend. You also have to confirm that trend. To confirm the trend means to avoid being stuck in a false trend.
To do this, we have to make sure that we see a signal for a new trend. And to see a signal for a new trend, we use other types of indicators.
Indicators that are good at confirming trends include MACD, Stochastic, and RSI.
It goes without saying that you have to familiarize yourself with how each indicators work. The more familiar you are with them, the easier it will be for you to spot and confirm a trend.
Know your Risks and Risk Tolerance
In any kind of trading style, you have to know the risks and risks that you are willing to take. If not, you might end up exposing yourself to more and worse risks than you can withstand. And when you are pressured by risks, you tend to be more negative and illogical when it comes to the trades you make.
Ask yourself how much you are willing to lose with every trade. Also, a good and prudent trader thinks first the things he or she will potentially lose. He does this before he thinks about how much he is potentially going to gain.