Creating a USDCAD Indicator Based USDCAD System
A USDCAD System refers to a set of USDCAD rules that you follow to manage your USDCAD trades. These USDCAD rules will determine when you open a USDCAD trade & when you will exit. A USDCAD trade system is created by combining two or more indicators.
For example, the Stochastic Oscillator can be combined with other indicators to form a USDCAD system. For this example stochastics can be combined with the indicators below to come up with the following USDCAD system.
- RSI
- MACD
- MAs Indicator
Example
Creating a USDCAD System - USDCAD System Example
So the question is how can a trader come up with a USDCAD systems that works & how does one write its rules? Follow the steps below:
Seven steps to creating an indicator-based USDCAD system
To come up with these set of rules for USDCAD currency pair we use the following seven steps.
1. Choose your USDCAD Time Frame
The first step depends on how many hours you want to set a side to USDCAD trading. Whether you prefer sitting in front of the Desktop computer constantly for several hours analyzing short USDCAD time frames OR you prefer setting up your charts using bigger USDCAD time frames once or twice a day. Choosing a charts time-frame will mainly depend on what type of USDCAD currency trader you are.
USDCAD Chart Time Frames on MT4 - USDCAD MetaTrader 4 Chart
While testing your new USDCAD system you may want to find out about its performance on different USDCAD timeframes and then choose the most accurate & profitable USDCAD timeframe for you.
2. Choose indicators to spot a new trend
The goal of a USDCAD currency trader is to get into the USDCAD trade as early as possible and take maximum advantage of price moves.
One of the common ways to identify a new USDCAD trend as fast as possible is to use MAs Indicator. A simple strategy is to use a Moving Average cross over system that will identify a new USDCAD setup opportunity at its earliest stage.
MA Crossover Strategy Method - USDCAD Strategy
USDCAD Sell signal and USDCAD Buy signal Generated by Moving Average Crossover Strategy Method
3. Select additional indicators to confirm the USDCAD market trend
Once we find a new USDCAD trend we need to use additional indicators that will confirm the USDCAD entry signals & give either a green light for action or save a trader from fake-outs.
To confirm the signals we use RSI & Stochastic.
RSI & Stochastic Oscillator USDCAD System
4. Finding entry and exit points
Once indicators are chosen so that one indicator gives the signal & another confirms the signal, it's time to enter a USDCAD trade.
A USDCAD trader should enter as soon as a signal is generated and confirmed after a candlestick closes.
Aggressive USDCAD traders enter a transaction immediately without waiting for the current price bar to close.
Other USDCAD traders wait until the current price bar is closed and then enter the transaction if the USDCAD trade setup has not changed and the signal remains valid. This method is more considerate and prevents additional false entries and whipsaws.
Generating USDCAD Signals
Generating USDCAD Trade Signals
For exits, one can either set an amount he wants to earn per trade or use technical tools that help to set profit goals like Fibo Expansion Indicator or set a protective stop loss depending on the USDCAD market volatility at any given time. Alternatively one can exit when the indicators give an opposite signal.
When opening a new USDCAD trade transaction it's always important to calculate in advance how much you're willing to lose if the USDCAD transaction goes against you. Although the aim is to develop the best USDCAD system in globe, losses are inevitable & hence being ready to tell where you will give up and cut your losses before beginning a USDCAD trade is very important.
5. Calculate risks in each USDCAD trading setup
In Forex you must calculate your risk for each USDCAD trade. Serious USDCAD 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 USDCAD in the long run.
The Risk to Reward Chart below shows you how:
Forex Money Management Reward Risk Chart - USDCAD Trading
In the first examples of Risk to Reward Ratio, you can get-to see that even if the USDCAD system only won 50% of your open USDCAD trades, you would still make profit of $10,000. Interpret more on this topic: Here Money Management Rules and Trade Money Management Methods.
Before opening a new USDCAD trade, a trader should define the point at which he will close the open USDCAD trade if it turns to be a losing one. Some traders use FX Fibonacci 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 USDCAD trade.
6. Write down the systems USDCAD rules & follow them
A Trade System refers to a set of USDCAD rules that you follow to manage your USDCAD trades.
The keyword is A SET OF USDCAD TRADING RULES which you must follow. If you do not follow the USDCAD currency pair rules then you do not even have a system strategy in the first place.
The next Forex systems lesson portrays to you an example of how to utilize the above steps to develop your own USDCAD online system:
Next Guide: Example of Writing USDCAD Systems Rules
7. Practice on a USDCAD Practice Demo Account
Without enough USDCAD trades, you will not be able to realize the true profitability of your USDCAD system.
Once you have your USDCAD system rules written, it's time to test & improve your USDCAD trade system by using it on a USDCAD demo practice account.
Open a free practice practice account and trade USDCAD your system to see how well it will respond.
It's 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 USDCAD currency pair works.
Once you start making some decent profit on your USDCAD demo account you then can try opening a live account & begin trading USDCAD currency pair with real money.
