Ok, a system. We will discuss this time to speculate how many times and run in a consistent profit from day to day. In trading, those who are experiencing profit will definitely return to open another trade in order to obtain greater profit. There are some people who I meet who say that if you have a percentage of profits in forex then he will soon end the trading and was satisfied enough with the profit that's all. I personally do not fully believe in words like that. The reason is if we have profit surely We will return to repeat the same profits is not it? Wong loss just a lot of trading back and try again (out of curiosity), much less profit?
The issue is if in our first trading profit, yet we certainly can do it for a second time. Is not our purpose to play the forex is profit, and keep the consistency of our profit? Well for that you need a system of trading that can at least help you earn trading profits consistently. That is why it is necessary to create a trading system.
A trading system is a set of methods both technical and fundamental trading that could lead us to make trades in various market conditions and of course to earn income.
If you do searching in Google with keyword "forex trading system" then you will find lots of search results. Many of them offer a perfect trading system and could give you hundreds of points profit per month! In the world of forex system like this is called "the Holy Grail." A term that refers to the trading method according to the rules which when implemented will give us profit in every state.
Would not that look interesting? A trading system that can give the profits of hundreds of points per month and will be a gold mine to keep forever! Some offered to pay thousands of dollars for the trading system like this model. What is worthy to be bought? Did not I already buy it if I can speculate with the system and break even after several months of trading?
Hehehehe, the one thing that I learned when surfing the Internet and read so much knowledge is how to distinguish a marketing language to language information. Most of the language marketing looks too good to be true. And advertising trading system like that it's too good to be true. Is not if it's a trading system generates, even without having to sell it even if the creators are able to produce thousands of dollars each month? Why bother to serve the buyer if the system just by following his creation he was able to become rich?
Suppose the system is correct, the hardest thing about a trading system, is not how to make it but how do we follow it with discipline. This is not an easy matter what else if it turns out that your trading system requires you to purchase trading between the hours of 00:00 to 03:00 every day for example. Are you capable? Wake up every day and was instead looking for opportunities for the trading system you have bought for several thousand dollars. That is just a matter of time, yet other problems such trappings innitial margin (initial capital), the model trading (swing, day or Scalp) and others.
The good news is that we can create our own trading system! And because trading is our own system must fit the pattern and characteristics of our trading. Better is not it? This article will help you for that. Creating a trading system is straightforward-easy easy easy easy easy-er mean hard. Especially the problem back test and forward the test. That is a back test is whether mengtes our trading profit on price movements for this to happen. While the forward test is to test it in demo account.
Determining the purpose of your Trading (Trading Objectives)
Exit house should have a purpose. Investment must have a purpose. But do not tell me your purpose in playing the forex is the maximum profit. The objective should be realistic and have a clear size. Realistic means in accordance with the capabilities we have today. Meaning should be stated clearly in the number or percentage and in a certain time as well. It would be better if the form of personal goals such as to buy a motorcycle for 12 Million within a period of 8 months. Now that a new name clear objectives.
Determining the purpose of forex trading helps us to determine ways of trading and capital we invest. Well then how do we determine our goals? The first one you need to know is do not be too grandiose in determining your target. Say only 10% every month for example. That's good enough. If you consistently achieve 10% each month for a year then you are able to earn as much as 120%, which is 12 times greater than our annual deposit interest! If you do not want to use a percentage but an exact figure, that's fine. How much? For example 12 million over 8 months like the example above cub. For just 12 million by 8 months, so your monthly profit is to 1.5 million each month. For longer by 20 days because the forex market is open 5 days a week and a month in 4 weeks so there is a daily profit that you must achieve is 75 thousand rupiah. That means the opening of as many as 1 lot GBPUSD position, you should get as much profit amounted to only 9 points each day. This figure was obtained from the price movement of 1 points is 1 USD and Rupiah exchange rate at the time of this writing is USD 8600 per dollar. Not too difficult right? Now with consistency as much as 9 points each day, you can afford to buy a motorcycle for his beloved wife after trading for 8 months. Is not it fun enough?
But remember the lesson of risk to reward ratio in our money management class several times before. Each opening is a position also means the possibility of loss ratios that can occur. Now it also must be considered in our trading. After all, in fact every time we do not always obtain trading profits is not it? Within 20 days of each month we could have had 5 days or even 10 days in which Stop Loss, so we touched not only the profit is not achieved, but also reduce our capital.
Kok feels so complicated huh?
Hahaha, do not worry, I aim to complicate rather than you. Creating trading purposes (trading Objectives) does can be very complicated if you want a very detailed profile targets but also can build your dream pleasant as if done with proper and simple.
Now we return to the risk to reward ratio. Objectives In determining trading, you also must determine the risk you are willing to bear his per trade. In each transaction, how much loss you want accountability? Now let's say you were the target profit is 9 points every day. If you prefer to risk ratio is the same then it means you have to put your Stop Loss for 9 points as well. And the bad news because it targets you have to get a motorcycle for 12 Million within a period of 8 months then you should not be loss, though in every transaction you once you place a Stop Loss or the target will not be achieved.
Hggh ... no way we never loss is not it? Now to provide extra space for terbelinya cub and the possibility of loss in some trades then there are several ways that can be done.
First is to raise your risk to reward ratio with a ratio of reward must be greater than its risk. Increase it 2 times so that your target profit (TP) to 18 points and Stop Loss (SL) fixed value of 9 points. Even if your loss is thus as much as 10 times in each month from 20 times the motor trade ducks can still be obtained. The following details the calculation of per day.
Determining Your Trading Type
Discussion this time is to determine how your type trading. Is a scalper or a day trader or a swing trader? This will be closely associated with forex charts you use, especially regarding the time frame.
Say you've determine your trading objective that is equal to 180 points a month (again on the motorcycle above the target, the Honda Tiger please search yourself how) then you must determine how your future trading patterns. About what it was swing, day traders, and scalper we have seen in some previous class forex our beloved school.
If you are a swing that is not necessarily one day open a position then of course the target can not be made at the break per day. It is wiser to breaknya per week or even per month. With a month then your net profit target to 180 points. For day traders scalper what else you can think to break it into a day as the previous table above.
Now what is desired is discussed in relation to the type of trading and your trading system is a matter of graphics that you will use in technical analysis in the future.
Usually a trader will use 2 time frames in the graph forexnya. The first graph is to determine the trend is going (trends confirmator) and usually use the time frame of this graph is fairly large. While the second graph is a graph to make an entry (entry confirmator) on the market that use a smaller time frame. Of course, small and great definition here in the time frame varies depending on the type of your trading.
If you are a swing trader then you can not use the charts time frame per 15 minutes or 30 minutes. To analyze the trend is usually a swing trader menggunaka aka 1D daily time frame. This means a single candlestick represents price movements for 1 day. We've been discussing what time frame on when we learn the candlestick much earlier.
To make entry in the market is usually a Swinger using 1-hour time frame in the graph forexnya. Movements were classified under 1 hour for the "whipsaw" for them. Whipsaw itself is a term in the more or less the forex trader is that currency movements are not only deceiving or actual trend. Note the picture above. Sections are given a red circle represents the area that is said to whipsaw (serrated like a saw blade). If a computer screen we see only those areas there is often whipsaw this swindle us to see the global trend. It's possible whipsaw on the graph indicate the direction down while major graph shows the direction of rise. Now this could be deceiving us.
Keep in mind no matter what time frame you use, whip of Allah is always there. The amount that could vary from each time frame. However, the smaller the time frame you use, the more whipsaw that appears in your forex charts. So, watch out!
For a scalper could be a whipsaw day traders at the major trend is for them. Profit of 30 points means a lot to them for a swing trader, while 30 points is just a whipsaw and insignificant.
And what about day traders? So day traders usually use the time frame to determine the major trend 4h them. To those accustomed to using the graphical execution 15m or 30M (M = minutes). Thus they will take the profit is not as much of a Swinger, but because it uses a smaller time frame then the opportunity to open positions and profit far more so even more frequently.
Furthermore, the last of a scalper. In general, a scalper using or 1h 4h time frame to determine their major trends. For the execution or determining the entry, they used to use a time frame of 10 or 5 minutes.
Well, adjust the pattern of trading with you. What is clear above the amount that is absolutely not something for you to follow. If you feel to be a day traders can also use 1D time frame to determine the trend is going so fine. Origin of course do not use the time frame 1W aka one wee.
Determining the Tools Technical and Fundamental Indicators
Ok, talk back on the trading system, surely you must know how to analyze and gain profit from it. At least you need a technical and fundamental indicators to predict 2 of the following:
1. Knowing the trend which is happening very quickly and accurately
2. The right time to make entry
To be able to know 2 things above, of course, technical analysis and fundamental role here. The first thing you need is to specify your technical indicators. While for the fundamental choice is not much and just added later in our trading system.
Ok let's get started. This can be said is the engine of your future trading system. First to be able to know the trends that happened, we must use a larger time frame and specific indicators to be measured. Why not use a smaller time frame? A smaller time frame would be more effective if we use it as a determinant for entry. Even if we use a smaller time frame, we can be trapped by the whipsaw of future price movements.
Like the original agreement that we assumed this was a day traders will then determine the time frame for graph trends is 4H.
To be able to determine trends that occur on a graph we will use 2 indicators. One for the indicator trend follower and another one is an indicator to determine overbought and oversold points. You do not want to experience that trend is going it will soon be over is not it? Well that's what we need to add Oscillator. For the trend indicator, we will use Exponential Moving Average as an indicator of a trend follower. And to define areas of our OB and OS will be using Stochastic Oscillator. For the period used, we will use Exponential MA with a period of 5 and 10. While it will use the period Stochastic (10,5,5).
Both will we plot the graph of 4H. The result in Netdania will be like this:
Here's how to use it. A rising trend can be classified only if it is above 5 XMA XMA 10 and Stochastic are not on the OB area (overbought) and also shows the direction of rise.
Conversely donw the trend is only valid if XMA XMA 5 under 10 and Stochastic are not on the OS area (oversold) and indicates the direction of fall.
It feels it is not too difficult is not it? Now we will determine the indicators to conduct an entry opening position. The contents of the indicator more or less the same the difference is only the rules alone. If the timeframe and a set of indicators to determine trends over time is to determine when it is time we open a position.
Time Frame used is 15 minutes or it could be 30 minutes. The indicators are also similar but this time we will add one more additional Oscillator indicator. We will add an indicator named William, Äôs% R with a period of 14 here. William, Äôs% R konfirmator useful to others along with the Stochastic Oscillator. But this time we will not use the 20-80 restriction in the use of William, but limits Äôs% R 50-50. So if William, Äôs% R indicates the direction of rise and are not under the restrictions -50 then it indicates prices are moving up by Williams.
Thus the picture that will happen is as follows: Then how the rules for entry on 30M this time frame? Simple. First you need to know is a buy and sell position would not be done without following the direction of the trend on the graph 4H confirmator earlier. The point is this: if the 4H charts show the current condition is the opening position of the uptrend will only be looking for buy positions and Sell Open positions will never be taken. Conversely, if graphics 4H shows downtrend direction then we will only seek the position of the Open Sell it and will never open a position no matter how good the Open Buy 1H graph looks up.
Open Buy we will do only if the graph rises and 4H show a trend on the graph 15m, XMA and Stochastic showing up direction and William, Äôs% R is not in the area of -50 to -100. O ya just information, the range of movement Wiliam, Äôs% R is in the 0 to -100. Slightly different from the RSI or Stochastic who were in the range of motion 0-100.
Sell Open only will we do when the 4H show a trend down and XMA and Stochastic we show the direction of fall and of course William, Äôs% R is in the area of -50 to -100.
Ok now the problem of fundamental news. There are several options when you are dealing with fundamental news.
1. Open a position before the fundamental news happens.
2. Open a position when fundamental news happens.
3. Opening the position after the news happens to take a fundamental correction in prices.
4. No open positions at all when approaching fundamental news or some time after the fundamental news is happening.
For the moment let us take the No. 4 course choice. This means that wherever possible we will avoid the fundamental news and not open the position some time before and after the fundamental news is happening. This is to facilitate us because when it appears fundamental news is usually the price while the market is driven by emotion and tend to be technical unpredictable.
Hoplaa, exhausting enough to put them together. The next step is not as difficult as this second step. There are a few final touches will we take after this.
Determining Magnitude and a Stop Loss Limit
Ok, this is not difficult. There are only a few simple tricks that we use here. The first is the problem of limits. Because we are targeting as many as 180 points a month then at least the target profit per trade should be as much as 9 points (assuming a single trading day). But it was 9 points is not too felt and yet again we must consider the lack of market conditions, holidays, or risk to reward ratio.
But I have a better idea to determine when we must make profit taking. Profit taking in the Open Buy only will we do when XMA on 1H show a trend down or William's% R at 1H was in the area -100 to -50.
For Stop Loss suffice it 30 points. We can not use a Stop Loss that is too small because no matter how pretty the price ranges that need to perform the movement. Should not be too small so that the blocking range of motion but also the price should not be too large sehngga make us feel bad loss "hurts."
If you do not like the scheme of variable profit-taking way, you can replace them with 60 points, and thus your risk to reward ratio becomes 1:2. Oh yes, you can just move your Stop Loss when the profit was earned. For example if by using the above system we have obtained a profit of 30 points due to open Buy GBPUSD at 1.9850. Now the price has been at 1.9880. You can move your Stop Loss at 1.9850 from the initial point at 1.9820 in order to maintain the possibility of prices reversed course. Thus if you touched SL even when no loss occurs.
Make Back test.
Ok let's look at the system we have made this on several existing candlestick charts. You also can back other test to ensure that the system that we just make this go well together in different price conditions. Back test (and also forward test) takes time and is not easy. Required fidelity in doing so. We expect this to be homework do you do to test the trading system we have just given birth together.
It is good to do a back test and forward test your trading system within a reasonable time. You are welcome to try to forward test on platforms Gain Capital during 2 months to know that you can build a system that is accurate and consistent.
Here are some pictures of examples of entry and exit with our new trading system. For ease of loading and shooting, 4H time frame is not included here. It looks good. Believe me, I do not do Some nonsense here.
do and Obey Your Trading System
Ok we've created a trading system. Not bad for a beginner forex. And you've probably already tried it several times in the demo account. Not seem promising enough?
The final step when you know that the trading system that you have made profitable is to run it with discipline. Indeed it sounds stupid if we did not run well a system capable of giving us a consistent profit every month. But the reality is this. There are more difficulties to run a trading system with discipline compared to create it. That's true. The main cause is a matter of psychology. Sometimes a beginner not patient enough to determine objectively that the price really is the trend down or vice versa. Patience may prevent you from doing the mistakes that are not necessary.
Oh yes, before we proceed to the next class, you can always create a trading system for yourself whenever you want. What are exemplified above is not a guarantee of profit or formula is also exact. Outside there were so many traders that creates a variety of secret formula for their trading. You can even create your own! Or you can change the above example for the future create a better trading system than our present article. If better is fine you send it to us. Who knows can replace this article.
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