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Guidelines for Creating Your Own Forex Trading System (Part 1)

When designing your own Forex trading system, there are several aspects to consider regarding finding entry points, determining exit points, and avoiding false signals. Here are the steps to creating an effective and profitable trading system:

Step One: Choosing Your Time Frame

The first step in designing a trading system is to choose a time frame that suits your trading style. Consider how much time you want to spend on trading. Do you prefer intraday trading with short time frames like 5, 15, or 30 minutes that require constant monitoring? Or are you more comfortable with larger time frames, such as daily or weekly, which allow for more relaxed trading without being glued to the monitor all the time? Choose a time frame that suits your preferences and availability, but make sure to test your strategy across various time frames to select the most accurate and profitable one.

Step Two: Selecting Trading Tools

There are various trading tools and indicators available to Forex traders. However, not all indicators provide fast and accurate trading signals. The primary goal of a trader is to get fast entry signals and maximize profits from price movements. Some indicators that can provide quick signals about price changes are Exponential Moving Average (EMA), Simple Moving Average (SMA), Parabolic SAR, Stochastic, MACD, and so on. Fully understand how these indicators work to maximize the profits from the signals they generate.

Step Three: Choosing Currency Pairs and Their Active Trading Times

Each currency pair has different characteristics and behaviors. Some currency pairs are highly active and volatile, while others are more stable. Choose currency pairs that fit your strategy and find out the active trading times for these currency pairs. Utilize the hours with the highest activity to maximize profits.

Step Four: Selecting Additional Trading Tools for Signal Confirmation

After choosing the time frame, indicators, and currency pairs, the next step is to look for additional tools or indicators to confirm previous trading signals. Use confirmation indicators to validate previous entry signals and minimize the risk of false signals. You can use the same indicators with different settings or entirely different indicators. For example, if you're using the EMA 5 and EMA 10 crossover method as entry signals, you can use EMA 20 as confirmation. Or you can use other indicators like RSI, Stochastic, Fibonacci, and so on to confirm the entry signals you receive.

By following the above steps and continuing to learn and experiment, you can create an effective and profitable trading system according to your trading style and preferences.


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