Trading System Rules: Write Down The Rules of Your System & Follow Them

We shall use the previous steps to create a written trading system that generates the trade signals shown below using the 1 hour chart. We shall use the 1 hour chart to write the rules of this trading strategy.

A system refers to a set of written rules that you follow to manage your trades when trading in the market. These trading rules must be written down so as to guide you. The following tutorial will show you how to writedown the rules of your system.

The keyword is a SET OF RULES which you must follow. If you don't follow the rules then you don't have a trading system. systems must have rules which are written down within your plan.

Example of System below:

Writing Rules of a System - 1 hour Chart Timeframe System Example Template

You can come up with the above system using the steps below:

Step 1:

Choose your Chart Timeframe - 1 hour chart

Step 2:

Choose Indicators which spot a new trend - MA Crossover System.

Step 3:

Select Indicators which confirm the trend - RSI, Stochastic

Step 4:

Finding entry & exit points

Long Entry

1. Both MA pointing up
2. RSI above 50
3. Stochastic oscillator going up

Short Entry

1. Both MA pointing down
2. RSI below 50
3. Stochastic oscillator going down

Exit

1. MA gives opposite signal
2. RSI gives opposite signal

Step 5:

Calculating risks in each trade - 20 pips

Step 6:

Write down the trade system rules

Step 7:

Test the system on a practice account

After using these steps we come up with the written system rules below.

Writing System Rules

Example of How to Write System Rules - Writing Systems Rules

This trading system produces the signals as shown below. Using these rules traders can determine when to enter and exit trades.

How to Generate Buy & Sell Signals using Written System Rules

We have completed writing the rules, if you are researching on how to create the best system, this tutorial is a good start to guide you on how to do just that. This is one part of a the trading plan. Now how do you create a complete trading plan? - To read about how to create a trading plan go to the right navigation menu of this website under key concepts where you can find a link for this trade plan tutorial topic.