Creating a Commodity Trading System: Indicator Based Commodity Trading System

A Commodity System refers to a set of commodity rules that you follow to manage your Commodity trades. These commodity rules will determine when you open a Commodity trade & when you will exit. A Commodity trade system is created by combining two or more technical indicators.

For example, the Stochastic Oscillator can be combined with other indicators to form a trading system. For this example stochastics can be combined with the indicators below to come up with the following trading system.

• RSI
• MACD
• Moving Averages Commodities Trading Technical Indicator

Example

Creating a Commodity System - Commodity Trading System Example Template

So the question is how can one create a commodity trading systems that works & how does one write its rules? Follow the steps below:

Seven steps to creating an technical indicator based trading system

To come up with these set of rules for commodity we use the following seven steps.

1. Choose your Commodity Trading Time-frame

This first step depends on how many hours you want to dedicate to commodity trading. Whether you prefer sitting in front of the Desktop computer constantly for several hours analyzing short Commodity Trading time frames OR you prefer setting up your commodity charts using bigger Commodity Trading time frames once or twice a day. Choosing a commodity charts time-frame will mainly depend on what type of Commodity trader you are.

Commodity Trading Chart Time Frames on MT4 Platform - MT4 Commodity Trading Software

While testing your new commodity trading system you may want to find out about its performance on different Commodity Trading chart time frames and then choose the most accurate & profitable Commodity Trading chart time frame for you.

2. Select technical indicators to identify a new trend

The goal of a trader is to get into the Commodity trade as early as possible and take maximum advantage of commodity price moves.

One of the common ways to spot a new Commodity Trading trend as fast as possible is to use Moving Averages Indicator. A simple strategy is to use a moving average crossover system that will identify a new commodities setup opportunity at its earliest stage.

Moving Average Crossover Method - Commodity Trading System

Commodity Sell signal & Commodity Buy signal Generated by Moving Average Crossover Technique

3. Choose additional indicators to confirm the Commodity Trading market trend

Once we find a new Commodity Trading trend we need to use additional commodity trading technical indicators that will confirm the Commodity Trading entry signals & give either a green light for action or save a trader from fake-out whipsaws.

To confirm the signals we use RSI and Stochastic Oscillator.

RSI & Stochastic Oscillator Commodity Technical Indicator System

4. Finding entry and exit points

Once indicators are chosen so that one indicator gives the signal & another confirms the signal, it's time to enter a Commodity trade.

A trader should enter as soon as a signal is generated and confirmed after a candlestick closes.

Aggressive Commodity traders enter a transaction immediately without waiting for the current commodity price bar to close.

Other Commodity traders wait until the current commodity price bar is closed and then enter the transaction if the Commodity trade setup has not changed and the signal remains valid. This method is more considerate and prevents additional false entries and whipsaws.

Generating Trading Signals

Generating Commodity Trading Trade Signals

For exits, one can either set an amount he wants to earn per trade or use technical tools that help to set profit goals like Commodity Trading Fibonacci Expansion Indicator or set a protective stop loss depending on the Commodity Trading market volatility at any given time. Alternatively one can exit when the commodities trading technical indicators give an opposite signal.

When opening a new Commodity trade transaction it's always important to calculate in advance how much you're willing to lose if the Commodity Trading transaction goes against you. Although the goal is to create the best commodity system in the globe, losses are inevitable & therefore being ready to tell where you'll give up & cut your losses before starting a Commodity trade is very important.

5. Calculate risks in each Commodities trade setup

In Commodity Trading you must calculate your risk for each Commodity trade. Serious Commodity traders will only enter look to open an order it the risk to reward ratio is 2:1 or more.

If you use a high risk to reward ratio like 2:1, you significantly increase your chances of becoming profitable when trading Commodity Trading in the long run.

The Risk to Reward Chart below shows you how:

Commodity Trading Money Management Reward Risk Chart - Commodity Trading

In the first examples of Risk to Reward Ratio, you can see that even if your Commodity trading system only won 50% of your open Commodity trades, you would still make profit of $10,000. Read more on this course: Here Commodities Money Management Guidelines and Commodity Money Management Strategies Methods.

Before opening a new Commodity trade, a trader should define the point at which he will close the open Commodity trade if it turns to be a losing one. Some traders use Commodities Trading Fib Retracement Levels and support and resistance levels. Others just use a pre-determined stop loss to set stop loss order once they have opened a Commodity trade transaction.

6. Write down the systems commodity trading rules & follow them

A Commodity Trade System refers to a set of commodity trading rules that you follow to manage your Commodity trades.

The keyword is A SET OF Commodity TRADING RULES which you must follow. If you don't follow the rules then you do not even have a commodity system in the first place.

The next commodity trading systems lesson shows you an example of how to use the above steps to come up with your own Commodity Trading online commodity trading system:

Next Guide: Example of Writing Trading Systems Rules

7. Practice on a Commodity Demo Trading Account

Without enough Commodity trades, you will not be able to realize the true profitability of your trading system.

Once you have your commodity trading system rules written, it's time to test & improve your Commodity trade system by using it on a Commodity Trading practice trading account.

Open a free practice commodities trading practice account and trade Commodity Trading your system to see how well it will respond.

It is strongly recommended to begin with a practice commodities trading account and practice for at least for 1 or 2 months so as to gain some practice & experience how the commodity trading market works.

Once you start making some decent profit on your Commodity Trading demo account you can then try opening a live commodities account and start commodity trading with real money.