Creating a EURJPY Indicator Based EURJPY Forex System

A EURJPY Forex System refers to a set of EURJPY rules that you follow to manage your EURJPY trades. These EURJPY rules will determine when you open a EURJPY trade & when you will exit. A EURJPY trade system is created by combining 2 or more indicators.

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

• RSI
• MACD
• MAs Indicator

Example

Creating a EURJPY Forex System - EURJPY Forex System Trading Example

So the question is how can a trader come up with a EURJPY trading systems that works & how does one write its rules? Follow the steps below:

Seven steps to creating an indicator-based EURJPY Forex system

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

1. Choose your EURJPY Time Frame

This first step depends on the number of hours you as a trader want to set a side to EURJPY trading. Whether you prefer sitting in front of the Desktop computer constantly for several hours analyzing short EURJPY time frames OR you prefer setting up your charts using bigger EURJPY time frames once or twice a day. Choosing a charts time frame will mainly depend on what type of EURJPY currency trader you are.

EURJPY Chart Time Frames on MT4 - EURJPY MetaTrader 4 Chart

While testing your new EURJPY trading system you may want to find out about its performance on different EURJPY time frames & then select the most accurate & profitable EURJPY time frame for you.

2. Choose indicators to spot a new trend

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

One of the common ways to spot a new EURJPY trend as fast as possible is to use MAs Indicator. A simple system is to use a Moving Average cross over system that will identify a new EURJPY setup opportunity at its earliest stage.

MA Crossover Strategy - EURJPY Strategy

EURJPY Sell signal and EURJPY Buy signal Generated by MA Crossover Strategy

3. Choose additional indicators to confirm the EURJPY market trend

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

To confirm the signals we use RSI & Stochastic Oscillator.

RSI & Stochastic Indicator EURJPY Forex System

4. Finding entry & exit points

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

A EURJPY trader should enter as soon as a signal gets generated & confirmed after a candlestick closes.

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

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

Generating EURJPY Signals

Generating EURJPY 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 EURJPY market volatility at any particular time. Alternatively one can exit when the indicators give an opposite signal.

When opening a new EURJPY trade transaction it's always important to calculate in advance how much you're willing to lose if the EURJPY transaction goes against you. Although the goal is to develop the best EURJPY Forex system in globe, losses are inevitable and hence being ready to tell where you'll give up and cut your losses before beginning a EURJPY trade is very important.

5. Calculate risks in each EURJPY trading setup

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

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

The Risk to Reward Chart below shows you how:

Forex Money Management Reward Risk Chart - EURJPY Forex Trading

In the first examples of Risk to Reward Ratio, you can see that even if your EURJPY trading system only won 50% of your open EURJPY trades, you would still make profit of $10,000. Interpret more on this topic: Here Money Management Rules and Trade Equity Management Methods.

Prior to opening a new EURJPY trade, a trader should define the point at which he will close the open EURJPY trade if it turns to be a losing one. Some traders use Forex Trading Fibo 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 EURJPY trade transaction.

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

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

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

The next systems lesson portrays to you an example of how to use the above steps to develop your own EURJPY Forex online system:

Next Tutorial: Example of Writing EURJPY Systems Rules

7. Practice on a EURJPY Demo Account

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

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

Open a free practice forex practice account & trade EURJPY your system to see how well it will respond.

It's strongly recommended to begin with a practice account & practice for at-least for 1 or 2 months so as to gain some practice & experience how the EURJPY currency pair works.

Once you start making some decent profit on your EURJPY demo account you can then try opening a live Forex account & begin trading EURJPY currency pair with real money.