Developing a EURUSD Indicator Based EURUSD System

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

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

• RSI
• MACD
• Moving Averages Indicator

Example

Creating a EURUSD System - EURUSD System Example

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

Seven steps to creating an indicator based EURUSD Forex system

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

1. Choose your EURUSD Time Frame

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

EURUSD Chart Time Frames on MT4 - EURUSD Chart in MT4 Chart

While testing your new EURUSD system you may want to find out about its performance on different EURUSD chart timeframes and then choose the most accurate & profitable EURUSD chart timeframe for you.

2. Select indicators to identify a new trend

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

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

Moving Average Crossover Technique - EURUSD Strategy

EURUSD Sell signal and EURUSD Buy signal Generated by Moving Average Crossover Strategy Method

3. Select additional indicators to confirm the EURUSD market trend

Once we find a new EURUSD trend we need to use additional indicators that will confirm the EURUSD 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.

RSI & Stochastic Oscillator EURUSD System

4. Finding entry and exit points

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

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

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

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

Generating EURUSD Signals

Generating EURUSD Trade Signals

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

When opening a new EURUSD trade transaction it's always important to calculate in advance how much you are willing to lose if the EURUSD transaction goes against you. Although the goal is to come up with the best EURUSD Forex system in world, losses are inevitable & therefore being ready to tell where you will give up & cut your losses before beginning a EURUSD trade transaction is very important.

5. Calculate risks in each EURUSD trading setup

In you must calculate your risk for each EURUSD trade. Serious EURUSD 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 EURUSD in the long run.

The Risk-Reward Chart below displays you how:

Forex Money Management Reward Risk Chart - EURUSD Forex Trading

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

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

6. Write down the systems EURUSD rules & follow them

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

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

The next systems lesson portrays to you an example of how to utilize the above steps to come up with your own EURUSD Forex online trading system:

Next Guide: Example of Writing EURUSD Systems Rules

7. Practice on a EURUSD Demo Account

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

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

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

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

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