Writing a Rule Based Trading Strategy

A xauusd trading strategy is a set of trade rules that specify when to open and when to close trades. To come up with a complete system a gold trader is also required to follow advanced trading rules that will guide his method. The trading rules are also part of the system but cover a much wider approach of how a trader uses their system when opening and closing trades.

Following things will also be included within the system which a xauusd trader will come up so as to make the system of a xauusd trader complete.

Mindset/Gold Psychology

This section of the trader'strade system will writedown the mindset that a gold trader will adhere to when setting their trade transactions using their trading system. Your mindset as a gold trader should specify that you will only follow the signals generated by your system & you will not open trades just because the market has begun to move up or move downward. If a signal isn't generated by your trading strategy then you'll not place and open any trade on the market. The way you will make sure that you follow only your system is by using gold psychology to control your emotions in trading.

You should be prepared to be disciplined enough when trading to follow what your strategy is saying. You should never go against your trading strategy & base your decisions on what the market is doing. You should be objective when following the trading rules of your trading system. This will be a matter of training yourself to adhere to your strategy even when you as a trader make a trade that losses money you must follow your system & close the Gold trade at the specified level where your rules say the Gold trade should be closed to avoid further losses. Close that trade & wait for another opportunity, there'll always be another opportunity to trade tomorrow, next week or next month you don't have to stay in one trade until you lose all you trading money & after you miss the other opportunities which you would have had.

You'll also have to figure out the best style technique for your personality so that you're comfortable with types of trade that you place in the market. For illustration if you can execute trade transactions quickly then you may choose to be a scalper, if on the other hand you are the type of trader who likes to take time before making a decision then scalping might not be the best method for you, instead you should become a day trader or a swing trader and that way you as a trader can have enough time between these trade positions to make trade decisions. Selecting and choosing a trading style that most suits your personality is the first thing that you should do as a trader. Once you've made the correct choice of your trading style/method that most fits and suits you, then you'll have the right trading psychology mindset when trading & you'll increase your chances of being more successful when trading the markets.

Set Goals To Follow When Trading

You have to know what goal you want to achieve when it comes to trading & executing trades with your system. Your goal might be that you want to follow your system all the time and never open any trade that isn't indicated by your system. Another goal may be that you want to be more disciplined when executing trades by being patient enough to wait for a signal to be generated/derived by your trading system before you open a trade & that you will not jump the gun & open a trade before the trading signal is generated. Sometimes a trader may see that a signal is about to be generated/derived by their system but it hasn't been derived and generated according to the trading rules of the trade system but a trader might & may make a decision to open a trade before the trading signal & wait out for the trading signal while they're in the market, this shouldn't be how a xauusd trader should trade, traders should learn how to be disciplined and patient enough to wait for the trading signal to be derived/generated before you open a trade.

Select and Choose one of the liquid XAU/USD To Trade

Traders should also specify the gold instruments that they will be trading with their system. A trader may come up with a trading system which has a strategy that is best suited for trading some instruments only. The trader should henceforth only trade with their trading system when they are trading only these price charts.

Most gold systems will produce best results when they are applied to liquid instruments and hence a gold trader should make sure that they only trade those trading instruments which are best suited for their strategy. This is why traders should specify in their gold rules the instruments that they will be trading.

Gold Equity Management Rules

For a system to be very successful then a gold trader should make sure that they also specify the gold money management rules that they will always follow when trading the market.

The gold money management method that a trader uses should have a high risk:reward ratio so as to give the Gold trader greater chances at becoming profitable when trading with their strategy.

The gold money management should specify at which level a gold trader will close-out a losing trade: the gold trader should also make sure that they close all their losing trades at this point.

A trader should also never risk more than 2% of their account equity on one single trade position.

The trader should also determine where they will always takeprofit when their trade is profitable. The take-profit level should be two times the stoploss order level. For example illustration is a gold trader is setting their stop losses at 25 pips then the gold traders should set their take-profit orders at 50 pips. This is what is known as a high risk : reward ratio to trade with. This risk reward ratio is 2:1, which means a gold trader can make two times profit the amount that they set as their loss. This way by using a high risk to reward ratio means that a xauusd trader will be more successful in the long run because their method uses a high risk-reward ratio which means that they stand to earn two times the amount that they set as their loss.

Keep a Trading Journal

Investors & Traders should always keep a journal & this journal will prove to be a very helpful trading tool when it comes to improving their system.

E.g. when a trader is designing their system & they want to test it out on the market, then the journal will prove to be a very helpful and useful tool to help them do this. This because while testing the trading strategy traders will record all their trade transactions on this journal and after a while they can use this trading journal to review their positions, traders can find out why the losing trades made losses & determine what factors in their strategies are resulting in generating trade signals which accrue losses, the gold trader then will try not to make these same mistake while trading in the future. A trader will also try & find the patterns that help them to make profitable trade transactions and the Gold traders then can use these setups to trade with in the future so that as they can improve the profitability of their system in the future and there help them to become more successful.

More Topics and Guides: