Developing a Bitcoin System: Indicator Based Bitcoin System
A Bitcoin System refers to a set of bitcoin rules which you follow & adhere to to manage your trade positions. These written bitcoin rules will determine when you open a bitcoin trade and when you'll exit. A bitcoin trade strategy is created by combining 2 or more indicators.
For illustration, the Stochastics Indicator Technical technical technical indicator can be combined together with other indicators to make a cryptocurrency trading system. For this example - stochastics oscillator can be combined with the crypto indicators below to come up with the following cryptocurrency system strategy.
- RSI indicator
- MACD
- MAs technical indicators
Example - MT4 Template System Example
Developing a System - Crypto System Examples Template
So the question is how can a trader come up with bitcoin trading systems that work like the trading system example above and how does one writedown it's rules? to write the bitcoin system rules follow steps below.
Seven steps to creating/developing an technical indicator based trading system
To create these set of bitcoin rules we shall make use of the following 7 steps.
1. Choose your Time-frame
The first step depends on how many hours you want to dedicate to bitcoin trading. Whether you prefer sitting in front of the Desktop computer constantly for several hours interpreting short crypto chart time-frames OR you prefer setting up your crypto charts using larger crypto chart timeframes once or twice a day. Selecting a chart time-frame will mainly depend on what type of trader you're.
Chart Time-frames in MT4 Platform Software
While testing your new bitcoin system you may want to find out about its performance on different crypto chart timeframes & then choose and select the most accurate and profitable crypto chart time-frame for you.
2. Choose indicators to identify a new bitcoin trend
The objective is to enter the trade at the earliest possible juncture to maximize the potential gains from bitcoin price fluctuations.
One of the common ways to identify a new bitcoin trend as fast as possible is to use MAs Indicator. A simple strategy is to use a MA cross-over system that will identify a new trading opportunity at its earliest stage.
MA Cross over Strategy Method
Sell cryptocurrency signal & Buy cryptocurrency signal Generated by Moving Average(MA) Cross over Bitcoin Method
3. Select additional technical indicators to confirm the bitcoin trend
a After identifying a fresh bitcoin trend, we must employ more technical indicators to validate the entry cryptocurrency signals and either give the all clear for action or protect the trader from whipsaws and fake outs.
To confirm the bitcoin signals we use RSI and Stochastic Oscillator indicator.
RSI Crypto Indicator and Stochastic Oscillator Bitcoin Indicator System
4. Finding crypto entry and btcusd exit points
Once indicators are selected so that one indicator gives and generates the signal & another indicator confirms the signal, it is time to enter a bitcoin trade.
A trader should enter a bitcoin trade as soon as a cryptocurrency signal is derived & generated & confirmed after a candle closes.
Traders who take more risks start a trade right away, not waiting for the current bitcoin price bar to end.
Other people trading wait for the present bitcoin cost chart to be done and then start trading if the trade plan is still the same and the trading advice is still good. This way is more careful and keeps away extra wrong trades and quick changes in trading.
Generating Bitcoin Signals - how to Generate Signals.
Generating Crypto Signals
For exits, a trader can either set an amount that they want to earn per trade or use technical bitcoin trading tools that help to set profit objectives like Fib expansion tool or set a protective stop loss order depending on the btcusd market volatility at any given time. Alternatively a trader can exit when the indicators give a signal in the opposite trend signal.
Always consider how much you're prepared to lose if the trade goes against you before initiating a new trade position. It's crucial to be able to identify where you'll give up and reduce your losses before initiating a bitcoin trade, even if the objective is to develop the greatest bitcoin trading strategy in the world.
5. Calculate risks in each bitcoin trade setup
With Bitcoin trading, you need to calculate your risk for every trade. Serious traders only place a trade if the risk-to-reward ratio is at least 2:1.
If you use a high risk:reward ratio like 2:1, you significantly increase and improve your chances of becoming profitable in the long run.
The Risk to Reward Chart below indicates to you how:
Crypto Money Management Risk Reward Chart - Examples Template Crypto System
In the first illustration of Risk Reward Ratio, you can get-to see that even if the system only won 50% of your trade positions, you'd still make profit of $10,000. Read more on this btcusd money management topic: Here Bitcoin Trade Capital Management Rules - MT4 Template System and Bitcoin Trade Money Management Methods - Template Strategy Example.
Before opening a new bitcoin trade, a bitcoin trader should define the point which they will close the bitcoin trade if it turns to be a losing bitcoin trade. Some traders use Fib retracement levels tool and support and resistance zones. Other traders just use a pre-determined stop loss to set stop loss crypto orders once they've opened a btcusd trade.
6. Write down the bitcoin systems rules and follow them
A Bitcoin Trade Strategy is defined as a predefined set of operational guidelines that a trader adheres to for managing their market positions.
The important thing is A SET OF TRADE RULES that you have to follow. If you don't follow the rules for bitcoin, then you don't really have a plan for bitcoin.
The next lesson on Bitcoin trading systems shows an example. It covers how to use these steps to build your own online Bitcoin trading setup.
Next Lesson: Example Illustrations of Writing Bitcoin Trading Systems Rules
7. Practice on a Practice Practice Demo Account
Without enough trades, you'll not be able to realize the true profitability of your strategy.
Once you've written down your bitcoin trading system rules, it's time to test and tweak your system by running it on a demo account.
Establish a complimentary virtual account and deploy your bitcoin trading system to evaluate its operational consistency.
It's best to start with a demo account and practice for a month or two. That way, you really get a feel for how the BTCUSD market works.
Once you start & begin earning some decent profit on your demo practice account you then can try opening a live account and start trading with live money.
More Lessons and Tutorials & Courses:
- How Can You Set Buy Limit Order in MetaTrader 5 Software?
- Top 10 Bitcoin Indicators
- Mobile Bitcoin Trade Platforms List
- What's BTCUSD Trading Parabolic Trend?
- How to Open a Real MetaTrader 5 BTC USD Account
