MT4 Template System

A System refers to a set of rules that you follow to manage your trade transactions. These written rules will determine when you open a trade & when you'll exit. A trade system is created by combining two or more indicators.

For example, the Stochastic Oscillator technical indicator can be combined with other indicators to form a trading system. For this example - stochastic oscillator can be combined with the indicators below to come up with the following system.

• RSI indicator
• MACD indicator
• MAs indicators

Examples - MT4 Template System Example

Creating a System - System Example

So the question is how can a trader come up with trading systems that work like the trading system example above and how does one write it's rules? to write the system trading rules follow the steps below.

Seven steps to creating an technical indicator based system

To come up with these set of rules we use the following seven steps.

1. Choose your Chart Time-Frame

This first step depends on the number of hours you want to set a side to trading. Whether you prefer sitting in front of the Desktop computer constantly for several hours analyzing short chart time frames OR you prefer setting up your charts using bigger chart time frames once or twice a day. Choosing a chart time frame will mainly depend on what type of trader you are.

TimeFrames on MT4 Software

While testing your new trading system you might want to find out about its performance on different chart timeframes and then choose the most accurate & profitable chart timeframe for you.

2. Choose indicators to identify a new trend

The goal of a trader is to get into the trade as early as possible and take maximum advantage of price moves.

One of the common ways to spot a new trend as fast as possible is to use MAs Indicator. A simple system is to use a MA crossover system that will identify a new opportunity at its earliest stage.

MA Crossover Technique

Sell signal and Buy trading signal Generated by MA Crossover Method

3. Select additional indicators to confirm the trend

Once we find a new trend we need to use additional indicators that will confirm the entry signals & give either a green light for action or save a trader from fake-outs.

To confirm the signals we use RSI indicator & Stochastic Oscillator indicator.

RSI Indicator and Stochastic Oscillator Indicator System

4. Finding xauusd entry and xauusd trading exit points

Once indicators are chosen so that one indicator gives the trading signal and another indicator confirms the trading signal, it's time to enter a trade transaction.

A trader should enter a trade as soon as a signal is generated & confirmed after a candlestick closes.

Aggressive traders enter a trade transaction immediately without waiting for the current price bar to close.

Other traders wait until the current price bar is closed and then enter the trade transaction if the trade setup has not changed and the signal remains valid. This method is more considerate and prevents additional false entries and trading whipsaws.

Generating Signals - how to Generate Signals.

Generating Trade Signals

For exits, a trader can either set an amount the wants to earn per trade or use technical tools that help to set profit goals like Fibonacci expansion tool or set a protective stop loss depending on the market volatility at any particular time. Alternatively a trader can exit when the technical indicators give an opposite trading signal.

When opening a new trade transaction it's always important to calculate in advance how much you are willing to lose if the trade goes against you. Although the goal is to develop the best system in world, losses are inevitable & hence being ready to tell where you will give up & cut your losses before starting a trade is very important.

5. Calculate risks in each trading setup

In Gold, you must calculate your risk for each trade. Serious traders will only enter & look to open an order if the risk:reward ratio is 2:1 or more.

If you use a high risk to reward like 2:1, you significantly increase your chances of becoming profitable in the long run.

The Risk-Reward Chart below portrays you how:

Gold Trade Money Management Reward Risk Chart - Example Template System

In the first examples of Risk-:-Reward Ratio, you can see that even if your trading system only won 50% of your trades, you would still make profit of $10,000. Interpret more on this trading money management trading topic: Here Gold Trade Money Management Rules - MT4 Template System and Gold Money Management Strategies - Template System Example.

Prior to opening a new trade, a trader should define the point at which they will close the trade if it turns to be a losing trade. Some traders use Fibonacci retracement levels tool and support and resistance zones. Other traders just use a pre-determined stop loss to set stop loss orders once they have opened a trade transaction.

6. Write down the trading systems rules & follow them

A Trade System refers to a set of rules that you follow to manage your trades.

The keyword is A SET OF TRADING RULES which you must follow. If you don't follow the rules then you don't even have a trading strategy in the first place.

The next systems guide shows you an example of how to use above steps to develop your own online trading system:

Next Guide: Example of Writing Trade Systems Rules

7. Practice on a Demo Account

Without enough trades, you won't be able to realize the true profitability of your system.

Once you have your trading system rules written, it's time to test & improve your trade system by using it on a practice account.

Open a free practice account & trade your trading system to see how well it will respond.

It's strongly recommended to begin with a practice account and practice for at-least for 1 or 2 months so as to gain some practice & experience how the market works.

Once you start making some decent profit on your demo account you can then try opening a live account & begin trading with real money.