Making a USDJPY Indicator Based USDJPY System

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

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

• RSI
• MACD
• MAs Indicator

Example

Creating a USDJPY System - USDJPY System Example

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

Seven steps to creating an indicator-based USDJPY Forex system

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

1. Choose your USDJPY Time Frame

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

USDJPY Chart Time Frames on MT4 - USDJPY MetaTrader 4 Chart

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

2. Choose indicators to spot a new trend

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

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

MA Crossover Strategy Method - USDJPY Strategy

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

3. Select additional indicators to confirm the USDJPY market trend

Once we find a new USDJPY trend we need to use additional indicators that will confirm the USDJPY 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 USDJPY System

4. Finding entry & exit points

Once indicators are chosen so that one indicator gives the signal & another confirms the signal, it's time to enter a USDJPY trade.

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

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

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

Generating USDJPY Signals

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

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

5. Calculate risks in each USDJPY trade setup

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

The Risk to Reward Chart below shows you how:

Forex Money Management Reward Risk Chart - USDJPY Forex Trading

In the first examples of Risk to Reward Ratio, you can get-to see that even if the USDJPY trading system only won 50% of your open USDJPY 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 USDJPY trade, a trader should define the point at which he will close the open USDJPY trade if it turns to be a losing one. Some traders use Forex Fib 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 USDJPY trade.

6. Write down the systems USDJPY rules & follow them

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

The keyword is A SET OF USDJPY TRADING RULES which you must follow. If you do not follow the USDJPY currency pair rules then you do not even have a strategy in the first place.

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

Next Guide: Example of Writing USDJPY Systems Rules

7. Practice on a USDJPY Practice Account

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

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

Open a free practice practice account and trade USDJPY 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 USDJPY currency pair works.

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