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 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 key-word is SET OF RULES which you must follow. If you do not follow the rules then you do not 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 create 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 and exit points

Long Entry

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

Short Entry

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

Exit

1. MA generates opposite signal
2. RSI generates 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 the guide-lines 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 trade transactions.

How to Generate Buy and Sell Signals using Written System Rules

We have finished 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 as a trader 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.