Making a XAUUSD Indicator Based XAUUSD System
A XAUUSD System refers to a set of XAUUSD rules that you follow to manage your XAUUSD trades. These XAUUSD rules will determine when you open a XAUUSD trade & when you'll exit. A XAUUSD trade system is created by combining 2 or more indicators.
For example, the Stochastic Oscillator can be combined with other indicators to form a XAUUSD system. For this example stochastics can be combined with the indicators below to come up with the following XAUUSD system.
- RSI
- MACD
- MAs Indicator
Example
Creating a XAUUSD System - XAUUSD System Example
So the question is how can one come up with a XAUUSD systems that works and how does one write its rules? Follow the steps below:
Seven steps to creating an indicator based XAUUSD system
To come up with these set of rules for XAUUSD currency pair we use the following seven steps.
1. Choose your Gold Time Frame
The first step depends on the number of hours you as a trader want to set a side to XAUUSD trading. Whether you prefer sitting in front of the Desktop computer constantly for several hours analyzing short XAUUSD time frames OR you prefer setting up your charts using bigger XAUUSD time frames once or twice a day. Choosing a charts time frame will mainly depend on what type of XAUUSD currency trader you are.
XAUUSD Chart Time Frames in MetaTrader 4 - XAUUSD MT4 Chart
While testing out your new XAUUSD system you may want to find out about its performance on different XAUUSD timeframes & then choose the most accurate & profitable XAUUSD timeframe for you.
2. Choose indicators to identify a new trend
The goal of a XAUUSD currency trader is to get into the XAUUSD trade as early as possible and take maximum advantage of price moves.
One of the common ways to identify a new XAUUSD trend as fast as possible is to use MAs Indicator. A simple system is to use a moving average crossover system that will identify a new XAUUSD setup opportunity at its earliest stage.
MA Crossover Technique - XAUUSD System
XAUUSD Sell signal and XAUUSD Buy signal Generated by MA Crossover Strategy
3. Choose additional indicators to confirm the XAUUSD market trend
Once we find a new XAUUSD trend we need to use additional indicators that will confirm the Gold 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 XAUUSD 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 XAUUSD trade.
A XAUUSD trader should enter as soon as a signal is generated and confirmed after a candlestick closes.
Aggressive XAUUSD traders enter a transaction immediately without waiting for the current price bar to close.
Other XAUUSD traders wait until the current price bar is closed and then enter the transaction if the XAUUSD trade setup has not changed and the signal remains valid. This method is more considerate and prevents additional false entries & whipsaws.
Generating XAUUSD Signals
Generating XAUUSD 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 Fibonacci Expansion Indicator or set a protective stop loss depending on the XAUUSD market volatility at any specific time. Alternatively one can exit when the technical indicators give an opposite signal.
When opening a new XAUUSD trade transaction it's always important to calculate in advance how much you are willing to lose if the XAUUSD transaction goes against you. Although the objective is to come up with the best XAUUSD system in world, losses are inevitable & hence being ready to tell where you will give up & cut your losses before starting a XAUUSD trade transaction is very important.
5. Calculate risks in each XAUUSD trade setup
In you must calculate your risk for each XAUUSD trade. Serious XAUUSD traders will only enter look to open an order it the risk to reward is 2:1 or more.
If you use a high risk to reward like 2:1, you greatly increase your chances of becoming profitable when trading XAUUSD in the long run.
The Risk-Reward Chart below highlights you how:
Forex Money Management Reward Risk Chart - XAUUSD Trading
In the first examples of Risk-:-Reward Ratio, you can see that even if your XAUUSD system only won 50% of your open XAUUSD trades, you would still make a profit of $10,000. Interpret more on this course: Here Money Management Rules and FX Equity Management Methods.
Before opening a new XAUUSD trade, a trader should define the point at which he will close the open XAUUSD trade if it turns to be a losing one. Some traders use FX Fib Retracement Levels and support & resistance zones. Others just use a pre-determined stop loss to set stop loss order once they have opened a XAUUSD trade.
6. Write down the systems XAUUSD rules & follow them
A Trade System refers to a set of XAUUSD rules that you follow to manage your XAUUSD trades.
The keyword is A SET OF XAUUSD TRADING RULES which you must follow. If you don't follow the XAUUSD currency pair rules then you don't even have a trading strategy in the first place.
The next systems lesson highlights to you an example of how to utilize the above steps to come up with your own XAUUSD online trading system:
Next Guide: Example of Writing XAUUSD Systems Rules
7. Practice on a XAUUSD Practice Account
Without enough XAUUSD trades, you will not be able to realize the true profitability of your XAUUSD system.
Once you have your XAUUSD system rules written, it's time to test & improve your XAUUSD trade system by using it on a XAUUSD practice trading account.
Open a free demo practice account & trade XAUUSD your system to see how well it will respond.
It's strongly recommended to begin with a practice account & practice for at least for 1 or 2 months so as to gain some practice & experience how the XAUUSD currency pair works.
Once you start making some decent profit on your XAUUSD demo account you can then try opening a live account & begin trading XAUUSD currency pair with real money.
