Creating a XAUUSD System: Indicator Based XAUUSD System

A XAUUSD System refers to a set of xauusd rules that you follow to manage your XAUUSD trades. These xauusd rules will determine when you open a XAUUSD trade and when you will exit. A XAUUSD 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 Gold Trading Technical Indicator

Example

Creating a XAUUSD System - XAUUSD System Trading Example

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

Seven steps to creating an technical indicator-based xauusd trading system

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

1. Choose your XAUUSD Time Frame

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

Chart Time Frames on MT4 - MT4 XAUUSD Software

While testing your new xauusd trading system you may want to find out about its performance on different XAUUSD chart timeframes and then choose the most accurate and profitable XAUUSD chart time frame for you.

2. Select technical indicators to identify a new trend

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

One of the common ways to spot a new xauusd 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 gold setup opportunity at its earliest stage.

Moving Average Crossover Method - XAUUSD System

XAUUSD Sell signal and XAUUSD Buy trading signal Generated by Moving Average Crossover Method

3. Choose additional indicators to confirm the XAUUSD market trend

Once we find a new xauusd trend we need to use additional gold technical trading indicators that will confirm the XAUUSD entry signals & give either a green light for action or save a trader from fake outs.

To confirm the signals we use RSI and Stochastic Oscillator.

RSI and Stochastic Oscillator XAUUSD 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 XAUUSD trade.

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

Aggressive XAUUSD traders enter a transaction immediately without waiting for the current gold trading price bar to close.

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

Generating XAUUSD Signals

Generating 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 Fibonacci Expansion Indicator or set a protective stop loss depending on the XAUUSD market volatility at any given time. Alternatively one can exit when the technical indicators give an opposite signal.

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

5. Calculate risks in each Gold trade setup

In XAUUSD you must calculate your risk for each XAUUSD trade. Serious XAUUSD 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 greatly increase your chances of becoming profitable when trading XAUUSD in the long run.

The Risk to Reward Chart below shows you how:

Gold Money Management Reward Risk Chart - XAUUSD

In the first example of Risk to Reward Ratio, you can see that even if your xauusd system only won 50% of your open XAUUSD trades, you would still make profit of $10,000. Interpret more on this topic: Here XAUUSD Money Management Guidelines and Gold Money Management Methods.

Before opening a new XAUUSD trade, a trader should define the point at which he will close the open XAUUSD trade if it turns to be a losing one. Some traders use Gold Trading Fibonacci 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 XAUUSD trade transaction.

6. Write down the systems xauusd rules & follow them

A XAUUSD Trade System refers to a set of xauusd rules that you follow to manage your XAUUSD trades.

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

The next xauusd trading systems guide shows you an example of how to use above steps to come up with your own XAUUSD online xauusd system:

Next Guide: Examples of Writing XAUUSD Systems Rules

7. Practice on a XAUUSD Demo Trading Account

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

Once you have your xauusd trading system rules written, it is time to test & improve your XAUUSD trade system by using it on a XAUUSD practice trading account.

Open a free practice xauusd practice account and trade XAUUSD your system to see how well it will respond.

It is strongly recommended to begin with a demo xauusd account & practice for at-least for 1 or 2 months so as to gain some practice & experience how the xauusd instrument works.

Once you start making some decent profit on your XAUUSD demo xauusd account you can then try opening a live gold account & begin trading xauusd instrument with real money.