Making a GBPUSD Indicator Based GBPUSD System

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

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

• RSI
• MACD
• MAs Indicator

Example

Creating a GBPUSD System - GBPUSD System Example

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

Seven steps to creating an indicator based GBPUSD Forex system

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

1. Choose your GBPUSD Time Frame

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

GBPUSD Chart Time Frames on MT4 - GBPUSD MT4 Chart

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

2. Select indicators to identify a new trend

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

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

Moving Average Crossover Technique - GBPUSD Strategy

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

3. Select additional indicators to confirm the GBPUSD market trend

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

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

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

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

Generating GBPUSD Signals

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

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

5. Calculate risks in each GBPUSD trading setup

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

The Risk-Reward Chart below displays you how:

Forex Money Management Reward Risk Chart - GBPUSD Forex Trading

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

Before opening a new GBPUSD trade, a trader should define the point at which he will close the open GBPUSD trade if it turns to be a losing one. Some traders use FX 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 GBPUSD trade.

6. Write down the systems GBPUSD rules & follow them

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

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

The next systems lesson portrays to you an example of how to utilize the above steps to create your own GBPUSD Forex online system:

Next Guide: Example of Writing GBPUSD Systems Rules

7. Practice on a GBPUSD Demo Practice Account

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

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

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

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