Creating a successful and proven trading system is not an easy task. Different Forex strategies attempt to predict future prices based on past developments. We call it the concept of “Historical Moment vs. Present Moment.”
We will explain some of the basic concepts on how to build the different Forex apps and attempt to summarize the main tools used by traders in breaking down price patterns, with the free VPS included. This is useful before creating a free trading system that would follow our trading plan.
Traders typically ask these questions:
- How do you make money trading Forex?
- Is it possible to be successful using only technical indicators?
- What are the best technical indicators for successful trading?
- Can you give us the most predictive and effective indicators for day trading?
- Could you teach us the High Probability Trading Strategy System?
Discover in this article the different steps to follow to create your automatic trading system: definition of the strategy, backtesting of the strategy, and finally optimization of the strategy. We will then come back to the tips to stick to in order to avoid embarking on the design of your automatic trading system.
Creating an Indicator-based Trading App
Creating an indicator-based trading system is different from price action trading. A Forex trading system created with different indicators can be used successfully if the trader knows how to interpret them.
Too much information could cause what is known as “analysis paralysis”, which can prevent you from making trading decisions that would actually be profitable. Beginners should know once and for all that there is no best trading system in the world or a universal trading system.
It all depends on your trading style: some will prefer a moving average trading system, and others will consider an Exness trading system as the best trading system for them. In fact, the system only helps us to accumulate the odds in our favor and make profitable decisions. It helps us follow our trading plan.
Almost every trading platform comes with a host of indicators that those who engage in technical trading may find useful. You simply apply one of them to your chart and the trading system makes calculations based on past price, current price, and volume.
Please note that we will be talking here about discretionary trading and not about an automated trading system (or automatic trading system) such as automatic trading software or automatic trading robot, free or not.
Tips To Strengthen Your Trading System
When it comes to choosing a Forex trading system, you have a choice between buying a system and looking for one for free.
The biggest problem with free Forex trading strategies is that they are not time-tested.
However, having a trading system is not the only factor in determining your success.
Many newbie traders rely too much on their setups, which causes a problem: as soon as the market changes and their trading system starts losing money, the trader wants to completely change their strategy. The thing is, you don’t change your trading system because of a few losing trades. Here are some tips for adjusting and optimizing your existing system.
An Effective Trading System Is Adapted To Market Changes
The market changes all the time and a complete trading system should be adapted accordingly. The nature of the financial instruments largely depends on the macroeconomic environment at the time. Traders change their behavior based on the general economic climate because a currency can react to a news release, technical level, or manipulation.
The nature and extent of this reaction depend on many factors, such as:
- Inflationary cycles;
- Bullish/bearish equity market conditions;
- Global macroeconomic themes.
Many perfectly suited trading systems suddenly stop working due to changing market conditions. You need to take this into account if you want an effective trading system.
Adapt your auto trading system to current market conditions by changing your system’s indicator settings. If you are trading price action only, try to follow short-term historical trends.
A Winning Trading System Requires Your Trust
When you start trading on a real account, you may find yourself in the following situation: as soon as you lose a few trades, you start to wonder about the reliability of your trading system.
You are already thinking of making all the changes necessary to obtain a successful trading system. However, be careful. The Forex market is constantly changing and you should adapt to it. You also need to give your system a chance to prove itself.
Otherwise, you will end up starting from scratch every time you take a loss. To have the best trading system, you have to trust it.
Trading System — Defining Its Dimension
Trading consists of different styles which we call “dimensions”. As a trader, you should choose the styles that you are most comfortable with. Whichever dimension you choose, rest assured that knowledge of price action will complement all trading styles. We can categorize Forex trading dimensions as follows:
- Price Action
- Price action and indicators combined
- Pure indicator
- Harmonic models
- Beach bars
- VSA (Volume Spread Analysis ): volume spread analysis
- Point and Figure.
Simple Trading App — Set A Period
Capital trading pushes the market one way or another. When the price is not balanced, it can create an oversupply for a given period. When you see an accumulation, the price does not move much and this tells us those market participants are happy with the current supply.
It’s time to change your time scales. The price may move in other time frames. Remember: the market is a shark and you are a fish following the shark.
When choosing the dimension you are going to trade in, it is time to choose the appropriate time frame. The periods are generally divided as follows:
- Long-term investment: monthly
- Medium to long term trading: weekly
- Swing trading: daily
- Intra-week swing trading: H4
- Intraday trading: M30-H1
- Scalp Swing: M15
- Scalping: M5-M15
- Extreme Scalping – M1
- MTF ( Multiple Timeframe Approach ): H4 H1 M30 or a different combination.
Create A Trading System — Using The 8-Hour Scales
MT5 offers different timeframes compared to the MT4 platform. Many traders prefer the 8-hour period. This particular time frame is an excellent compromise for swing traders, as it is between 4h and 1 day. It is very useful for day traders because it tells us the direction of the market. Intraday traders should pay attention to this timeframe regardless of the market they are trading.
Any Universal Trading System Requires Candlestick Analysis
The larger the candlestick wick (the shadow), the greater the chance of a reversal. Try to spot a hammer or a star. Follow the daily candlestick. If you notice either of these two patterns bouncing off support or rejecting resistance, consider a potential reversal day.
Trading System — Choosing The Right Indicators
Quite often you will come across a trading system that is complete at first glance but has dozens of cluttered indicators on the screen. We must say that this is a completely wrong approach. The more indicators you have, the more problems you have with MT4. It is always better to create a simple trading system.
The main purpose of Forex indicators is to:
- Set a trend
- Confirm a trend and an entry
- Place SL and TP.
If you clutter your charts with too many indicators, how will you define trend, entry, and targets? Different indicators will filter prices too much and you will enter a trade too late, or you will get a lot of bad signals.
Both of these situations can deplete your account faster than you can imagine.
Indicators to Utilize
For a winning trading app, we recommend these specific indicators:
- A leading indicator
- A lagging indicator
- A static/dynamic support or resistance indicator
- An entry indicator, usually a main.
The most popular leading indicators are:
While the most popular lagging indicators are:
We strongly recommend that you download MetaTrader Supreme Edition because you will have access to perfectly coded and non-lagging indicators that will make your MT4 as light as ever.
We usually use a lagging indicator to confirm the trend and a leading indicator to confirm an immediate entry or trend depending on the settings. The static or dynamic pivot point indicator is used to place stop-losses and targets.
The point to remember is not to hesitate to test different indicators and settings on a demo account before trading live.
Trading System — Backtest, Forward Test, and Live Test
First, you need to know how your trading system would have worked in the past, before testing it in the present. Backtesting is the process of testing a trading strategy on historical data to find out how it would have performed in the past.
It works on the premise that if a winning trading system has worked well in the past, it will continue to do so in the future. Market conditions are constantly changing, and this is the limit of backtesting. Successful currency trading is a time-consuming but doable process.
Trading System And Test Forward
Forward or futures testing is a simulation of real trading and includes tracking the logic of the trading system in a live market. We usually call it “paper trading” because trading entries, exits, and stops are documented and analyzed. No actual trade is executed.
Forward tests should be very logical and follow the trading system religiously. Otherwise, it will be impossible to assess the effectiveness of the system.
Trading System — Live Now!
After applying the above 5 steps, you should try your Forex trading system in real mode. Find the optimal balance of trade execution. Remember that sometimes having no position is like having a profitable position.
One of the critical factors for success in Forex trading is learning price action. Remember that price action trading can only supplement your knowledge of trading indicators. And don’t forget to use the VPS tool which we hope will help protect you in case volatility is too high.
You Could Also Trade on Exness Websites
Everyone has their own opinion, but trading on an application can sometimes put off some users who do not want to be limited to their smartphones. With screens that are sometimes very small, it is difficult to get a good idea of things, especially since trading can sometimes represent very large amounts.
Fortunately, this is not the only option available, and you can also trade on the web from a computer. By choosing a website, it’s now or never to be able to invest in the stock market seriously and sustainably.
Thanks to the technological improvement of personal computers and the appearance of trading software such as NinjaTrader and MultiCharts benefiting from professional programming languages (Microsoft C#, Python, etc.), but also thanks to access to historical market data, all everyone can now create and automate their trading strategies at little cost.
The idea of having your system designed and then installed on a VPS server to trade for you is appealing. And why not go so far as to imagine going to the beach in the Maldives with your girlfriend while your computer reaps the rewards?
You will first have to work: make the effort to learn a programming language. Then, you will quickly understand that it will then be necessary to monitor the positions taken in real-time as soon as you commit substantial amounts. This is why we don’t like to use the popular expression “Robot trading” and prefer to speak of “trading system” because you will realize that in certain market configurations, you will have to know how to “unplug” it.
Yes, there are indeed simpler programming languages such as Metatrader, or even “assistants” to the design of trading systems, but these will not allow you to use the power of professional languages (which are now free) to design a real robust strategy, or even simply to find a real winning strategy.
Moreover, concerning the creation of trading strategies with languages like C# or Python, we would even allow me to say that your imagination will be your only limit (well, almost)!
(Devdiscourse’s journalists were not involved in the production of this article. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)