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Creating a Forex Trading System That Works - 4 Example Templates

When creating your own Forex system, there are a few things to keep in mind. Your trading strategy needs to be able to spot new Forex market trends, while at the same time making sure you do not to get faked out/whipsaws. The real trick is, once you have created a Forex trading system that works for you, stick to it. Being disciplined will help you a lot in becoming successful.

 

Before trading Forex on a live Forex account, you have to figure out what strategy works for you. It is good to know in what time frame you are going to be working in, and how much you are willing to risk once you begin. All these factors should be factored in, and should be written down within your Forex trading plan. A good place to test this would be on a free demo practice account. This is where you test your strategies risk free without investing money to determine which strategy is best suited for you.

 

So, now how can a Forex trader like you come up with a "good trading system" or the "best Forex trading system"?

To come up with a good currency trading strategy the first thing to do is to define your objective or goal:

 

The following example illustrates a goal and explains the rules of how to achieve that goal

Goals

1. Identify a new trend

Moving average crossover method is the most commonly strategy used to identify a new trend. The time to open a long or short trade is determined when two averages cross over or cross under each other.

2. Confirm the new trend

Relative Strength Index(RSI) and Stochastic Oscillator are the most commonly used indicators to confirm a Forex trend.

 

Indicator-based

The best type of a trading method is one that is indicator-based. You will find it straightforward to generate the trading signals and thus less error-prone on your part and this will help you to avoid market whipsaws.

 

There are several things we want to achieve when creating a system:

  1. Find entry points as early as possible.
  2. Find exit points securing maximum gains.
  3. Avoid fake entry and exit signals.
  4. Proper Money Management Rules

Accomplishing these four goals will result in a profitable Forex trading strategy that works.

 

The last piece of information needed, is deciding how aggressive you are going to be when entering and exiting a trade. Those who more aggressive wouldn't wait until the chart candlestick closes and would enter as soon as their indicators match up. But most would wait until the chart candlestick of the time frame they are using has closed, to have more stability when entering a the market.

 

To get huge profits out of the foreign exchange market you need to build your own profitable trading system; a method that will bring your not just hundreds but thousands of dollars worth of revenues. You need to have your own strategy that will help you achieve your financial goals. Sometimes the best Forex trading systems are the ones that you build on your own. No need to keep searching online for the best Forex systems or for Forex trading systems that work, this website provides you with all the tools required to help you and guide you on how to come up with your own Forex systems.

 

Below is an example of a Forex trade system based on RSI, MACD and Stochastic.

Creating Indicators Based Forex Trading System

Forex Currency Trading System

 

The currency trading system example above is comprised of four technical indicators in total, all of these generate Forex trade signals using different methods, the moving average will generate signals using the crossover method shown, the RSI, Stochastic and MACD use different analysis to generate the long and short signals as shown in the above example. How to generate these Forex signals is discussed in the next topic (on the sidebar navigation menu under key concepts).

 

For beginners, it is difficult for them to device their own Forex strategies since they do not have much knowledge about the Foreign exchange market. However, this site will explain how one can create their own free Forex trading system in just seven easy steps. The best strategy is the one you come up with yourself and learn how to trade the foreign exchange market with it.


The main advantage of creating your own free Forex trading systems is that you will know how to make profits by yourself-and not rely on other peoples efforts.

 

In the next lesson located at the sidebar navigation menu below the key concepts will show you how to create a trading system like the one above, write it's rules and how to back test it on a practice demo account before using it on a live Forex account.

 

4 Examples of Free Forex Currency Trading Systems

 

Example 1: The Moving Average Crossover Method

The cross over method uses two moving averages to generate Forex signals. The first MA uses a shorter period and the second is a longer period.

Moving Average Crossover Method Trading System

Crossover Method

 

This above method is referred to as the moving average crossover method because signals are generated when the two averages cross above or below each other.

Short signal Long signal Generated by Moving Average Crossover Method

Forex System Trading Example - Short and Long signal Generated

 

A buy signal or going long trade is generated when the shorter average crosses above the longer average (Both Moving Averages Going Up).

 

A sell signal or a going short trade is generated when the shorter average crosses below the longer average (Both Moving Averages Going Down).

 

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Example 2: Stochastics Forex Trading System



Stochastic Oscillator can be combined with other Forex indicators to form a system.

  • RSI
  • MACD
  • Moving Averages

 

Trading Systems Forex Example

Stochastic oscillator RSI and MACD Method Trading System

Short Signal or Sell Signal


How the short signal was generated


From our rules the short signal is generated when:

  1. Both Moving Averages are heading down
  2. RSI is below 50
  3. Stochastic heading downwards
  4. MACD heading downwards below center-line


The short signal was generated when all the written trading rules were met. The exit signal is generated when a signal in the opposite direction is generated.

 

The good thing about using such a method is that we are using different types of indicators to confirm the signals and avoid as many whipsaws as possible in the process.

  • Stochastic - momentum oscillator
  • RSI - momentum oscillator
  • Moving Averages - trend following indicator
  • MACD - trend following oscillator

 

Based on the chart time frame used this strategy can be used as Forex scalping system when the minute charts are used or as a Forex day trading system when hourly charts are used.

 

Example 3: Trading System Forex Example

 

This trading system is fully explained within the Forex trading plan on the Forex trading plan tutorial on this website under the Forex key concepts section located on the right navigation menu.

Chart Time frame

1 hour chart



Indicators that identify a new trend

Moving Average Crossover

Indicators that confirm the trend

RSI

STOCHASTIC OSCILLATOR



Long Entry

1. Both MA(moving averages) pointing up

2. RSI above 50

3. Both stochastics going up




Short Entry

1. Both MA pointing down

2. RSI below 50

3. Both stochastics going down




Exit

1. MA gives opposite signal

2. RSI gives opposite signal




Risk Management

Stop loss- 35 pips

Take Profit- 70 pips

 

Reward to Risk 2:1

 

 

Example 4: New Gann Swing Chartist Plan

The Gann Swing Oscillator is meant to be used in combination with the Gann HiLo Activator and Gann Trend to form a complete Forex strategy commonly referred to as the - "New Gann Swing Chartist Plan". Within this methodology the Gann Swing Oscillator is used to help determine market swings for trading only within the current market trend is shown by the Gann Trend.

 

Below is the example of the New Gann Swing Chartist Plan

New Gann Swing Chartist Plan - Example Forex Trading System

The Gann Chartist Plan - Forex Trading Systems

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