Writing a Rule Based Trading Strategy

A gold system is a set of trade rules that specify when to open & when to close trades. To come up with a complete trading system a gold trader is also required to the following advanced rules that will tutorial his method. These rules are also part of the system but cover a wider approach of how a trader uses their system when opening & closing trades.

Following things will also be included within the trade system which a xauusd trader will come up in order to make the trade 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 follow when setting their trades using their system. Your mindset as a xauusd trader should specify that you will only follow the signals generated by your system & you will not open trades just because the market has started to move up or move down. If a trade signal is not generated by your system then you will not place 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 system is saying. You should never go against your system & base your decisions on what the market is doing. You should be objective when following the rules of your trading system. This will be a matter of training yourself to follow your system even when you make a trade position that loses money you must follow your trading system & close the trade at the specified level where your rules say the trade should be closed to avoid further losses. Close that trade and wait for another opportunity, there'll always be another opportunity to trade tomorrow, next week or next month you don't have to stay on one trading until you lose all you money and after you miss the other opportunities which you would have heard.

You will also have to figure out the best style method for your personality so that you're comfortable with types of trade that you place in the market. For example if you can execute trades quickly then you may select to be a scalper, if on the other hand you're the type of trader that 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 & that way you can have enough time between trades to make a decision. By selecting a trade style that most fits your personality is the first thing you should do and after you've made the correct choice of the method that most fits you then you will have the right mindset when trading & you'll increase your chances of being more successful when trading the market.

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 trading 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 by your trading system before opening a trade & that you will not jump the gun & open a trade position before the signal is generated. Sometimes a trader might see that a signal is about to be generated by their system but it hasn't been generated according to the rules of the trade system but a gold trader might decide to open a trade position before the signal & wait for the signal while they are in the market, this shouldn't be how a xauusd trader should trade, traders should learn to be patient enough to wait for the signal to be generated before opening a trade position.

Select one of the liquid XAUUSD 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's best suited for trading some trading instruments only. The trader should henceforth only trade with their system when they are trading only these price charts.

Most gold systems will produce best results when they are applied to trading liquid instruments and therefore 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 Guidelines

For a system to be very successful then a xauusd 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 trader more 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 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 transaction.

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 is a xauusd trader is setting their stops at 25 pips then the traders should set their take profit orders at 50 pips. This is what is known as a high risk to 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 the 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

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

For example 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 tool to help them do this. This because while testing out the system traders will record all their trades on this journal and after a while they can use this trading journal to review their trade 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 trader will then try to not make these same mistake while trading in the future. A trader will also try & find the patterns that help them to make profitable trades and the traders then can use these patterns to trade with in the future so that they can improve the profitability of their system in the future and there help them to become more successful.

More Topics & Lessons: