Developing a GBPAUD Indicator Based GBPAUD System

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

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

• RSI
• MACD
• Moving Averages Indicator

Example

Creating a GBPAUD System - GBPAUD System Example

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

Seven steps to creating an indicator based GBPAUD system

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

1. Choose your GBPAUD Time Frame

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

GBPAUD Chart Time Frames in MetaTrader 4 - GBPAUD MT4 Chart

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

2. Select indicators to identify a new trend

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

One of the common ways to identify a new GBPAUD 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 GBPAUD setup opportunity at its earliest stage.

Moving Average Crossover Technique - GBPAUD Strategy

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

3. Select additional indicators to confirm the GBPAUD market trend

Once we find a new GBPAUD trend we need to use additional indicators that will confirm the GBPAUD 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 & Stochastic Oscillator GBPAUD System

4. Finding entry & exit points

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

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

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

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

Generating GBPAUD Signals

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

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

5. Calculate risks in each GBPAUD trade setup

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

The Risk-Reward Chart below displays you how:

Forex Money Management Reward Risk Chart - GBPAUD Trading

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

Before opening a new GBPAUD trade, a trader should define the point at which he will close the open GBPAUD trade if it turns to be a losing one. Some traders use FX Fibo Retracement Levels and support & resistance levels. Others just use a pre-determined stop loss to set stop loss order once they have opened a GBPAUD trade.

6. Write down the systems GBPAUD rules & follow them

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

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

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

Next Tutorial: Example of Writing GBPAUD Systems Rules

7. Practice on a GBPAUD Practice Account

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

Once you as a trader have your GBPAUD system rules written, it's time to test & improve your GBPAUD trade system by using it on a GBPAUD demo account.

Open a free demo practice account and trade GBPAUD 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 GBPAUD currency pair works.

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