Saturday, August 27, 2011

Build Your Trading System in Six Steps

In this section we'll you a rough picture of what a trading system should look like. This should give you an idea of what you should be looking for when you develop your system.

Trading Setup

  • Trade on daily chart (swing trading)
  • 5 SMA applied to the close
  • 10 SMA applied to the close
  • Stochastic (14,3,3)
  • RSI (9)
Build Your Forex Trading System

Trading Rules

Entry Rules

Enter long if:
  • The 5 SMA crosses above the 10 SMA and both stochastic lines are heading up (do not enter if the stochastic lines are already in the overbought territory)
  • RSI is greater than 50
Enter short if:
  • The 5 SMA crosses below the 10 SMA and both stochastic lines are heading down AND (do not enter if the stochastic lines are already in oversold territory)
  • RSI is less than 50

Exit Rules

  • Exit when the 5 SMA crosses the 10 SMA in the opposite direction of your trade OR if RSI crosses back to 50
  • Exit when trade hits stop loss of 100 pips


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