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Six Steps To Set Up Your Trading System

You should have your own trading plan. Be careful in making your own trading system, just follow these simple six steps and you're on your way.

Step One: Time Frame

The first thing that you need to identify is the kind of personality that you have. And then determine how often you look at the charts. Are you looking at it everyday, every week or just once a month?

After you are able to answer this question, then you identify what kind of timeframe you will use in your trading business.

Step Two: Use the best indicators that can help you to identify a new trend.

Making use of tools such as indicators will definitely help you achieve your goal. One of the most popular indicators is the moving averages. Aside from moving averages there are also the spot indicator trends.

Step Three: Look for indicators that confirm the trend.

Of course we do not want to follow false trends. Once we see a signal from an indicator we also would want to confirm the signal by using other indicators.

The following indicators will help you confirm trends: Stochastics, MACD and RSI.

Step Four: Specify the risk you are taking.

Make sure that you indicate how much you are willing risk at trading. Not all traders want to think about losing such amounts, but in reality you must be open about this idea.

You need to have a good money management system, this will not guarantee that you will not lose money but definitely it will help you in a single trade.

Step Five: Know your entry points and exit points.

This is the next step that you must include in your trading system. Know your entry points as well as your exit points. Learning these points can make you earn more profit.

There are traders that hurry too much, enter as soon as they see that the indicators are signaling a good match up, while others would like to wait some time. There are traders that seem to be aggressive types of traders, while there are conservative types of traders as well.

There are different options for exit points. Make sure that you know all your exit points.

Step Six: Put your system in black and white, and strictly follow it.

Now, this is the most important step that you need to follow in creating your own system. Put your trading system in writing; place it at somewhere that you will always see it. Read your rules and follow it.

For you to follow your own rules you must have discipline. Remember that you need to stick to your rules.

Plan your trades and then trade your plan.