Creating a Crude Oil Trading System: Technical Indicator Based Crude Oil Trading System

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

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

• RSI
• MACD
• Moving Averages Oil Trading Technical Indicator

Example

Creating a Oil System - Oil Trading System Trading Example

So the question is how can one create a oil systems that works & how does one write its rules? Follow the steps below:

Seven steps to creating an technical indicator-based oil trading system

To create these set of trading rules for oil we use the following seven steps.

1. Choose your Oil Time Frame

This first step depends on how many hours you want to dedicate to oil trading. Whether you prefer sitting in front of the Desktop computer constantly for several hours interpreting short Oil Trading time frames OR you prefer setting up your oil charts using bigger Oil Trading time frames once or twice a day. Choosing a oil charts timeframe will mainly depend on what type of Oil trader you are.

Oil Trading Chart Time Frames on MT4 Platform - MetaTrader 4 Oil Trading Platform

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

2. Choose technical indicators to spot a new trend

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

One of the common ways to spot a new oil trend as fast as possible is to use Moving Averages Indicator. A simple strategy is to use a moving average crossover system that will identify a new crude oil trading setup opportunity at its earliest stage.

Moving Average Crossover Technique - Oil Trading System

Oil Trading Sell signal and Oil Trading Buy trading signal Generated by Moving Average Crossover Method

3. Choose additional indicators to confirm the Oil Trading market trend

Once we find a new oil trend we need to use additional indicators that will confirm the Oil Trading entry signals & give either a green light for action or save a trader from fake-out whipsaws.

To confirm the signals we use RSI & Stochastic Oscillator.

RSI and Stochastic Oscillator Oil Technical Indicator Trading 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 Oil trade.

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

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

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

Generating Trading Signals

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

When opening a new Oil trade transaction it is always important to calculate in advance how much you are willing to lose if the Oil Trading transaction goes against you. Although the goal is to create the best oil trading system in globe, losses are inevitable & therefore being ready to tell where you will give up & cut your losses before starting a Oil trade is very important.

5. Calculate risks in each Oil trade setup

In Oil Trading you must calculate your risk for each Oil trade. Serious Oil traders will only enter look to open an order it the risk to reward ratio is 2:1 or more.

If you use a high risk to reward ratio like 2:1, you significantly increase your chances of becoming profitable when trading Oil Trading in the long run.

The Risk-Reward Chart below shows you how:

Oil Trading Money Management Reward Risk Chart - Oil Trading

In the first example of Risk-:-Reward Ratio, you can see that even if your oil system only won 50% of your open Oil trades, you would still make profit of $10,000. Read more on this topic: Here Crude Oil Trading Money Management Rules and Oil Trading Money Management Methods.

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

6. Write down the systems oil rules & follow them

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

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

The next oil trading systems lesson shows you an example of how to use the above steps to come up with your own Oil Trading online oil trading system:

Next Guide: Examples of Writing Trading Systems Rules

7. Practice on a Oil Trading Demo Account

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

Once you have your oil trading system rules written, it is time to test & improve your Oil trade system by using it on a Oil practice trading account.

Open a free demo crude oil trading practice account and trade Oil Trading your system to see how well it will respond.

It is strongly recommended to begin with a demo crude oil account & practice for at-least for 1 or 2 months so as to gain some practice & experience how the oil trading market works.

Once you start making some decent profit on your Oil Trading demo crude oil trading account you can then try opening a live crude oil account & begin oil trading with real money.