If you often come across the term, ‘find your own trading system‘ and thought to yourself on how to go about finding such a system, fret not. It’s only a matter of time before you will eventually find a system that will stick to.
Without much further ado, in this article, i’d like to present my trading system. I’ll be really keen to hear from my readers about my trading systems.. so questions are welcome.
Trading System Name: TechTrading
I call it TechTrading simply because while fundamental analysis forms a daily part of trading, the actions (entering/exiting positions) are purely driven by technicals.
Elements of my trade setup
I make use of Pivot points as the primary trade set up. I find that it is much easier for me to understand price action using pivot points and also keep the more complex fibonnaci or camarilla away for the moment.
I won’t go much into the details on Pivot points.. i’m sure there are many articles on the web.
Besides pivot points, I also make use of trend lines and moving averages.
Putting all this together, this is how I see my system:
- The trend tells me which way the market is moving
- Pivot points tells me key price levels to look out for
- Moving averages tell me when is the best time to enter/exit a trade
Although I must note that if the trend is strong enough, then I might just jump in and take a trade.
Trading system psychology
For the moment, I find sticking to one forex pair and spot silver is more than enough. I don’t want to take in every pip possible but rather grow a sense of familiarity with the instruments. Secondly by trading just these two, I am also able to quickly recollect previous price levels and even the most recent trade that I closed.
Although my system is relatively new to me, I have noticed that when the right conditions are met, almost all my trades seem to have quite a decent accuracy.
For now, the focus is not on making certain amount of $$’s per day, but rather focus on fine tuning my system. Therefore, my focus will be on tweaking my system to the point that I find it comfortable to know when to enter the trade and when to exit and how strong the trade signals are.
Trading system – The Process
First step is look at at the daily fundamentals. This starts with looking into the day’s economic calendar with attention to NZD, USD, AUD pairs. So any news that concerns these above pairs will be something I should take into account.
To keep my system simple for starters, I won’t be trading a good one hour ahead and after any news release.
Identify the trend
Trend is an important element in forex which I think is often overlooked with complicated charts. I set about identifying the trend by looking at a higher time frame chart.. the Daily Charts. The prevailing trend on the daily chart will tell me which way the market is going and at which point the price is (early trend, mid way or towards the end).
This is how my chart looks like after plotting the trend on the daily chart.
The next element is to add the pivot points. Note that these pivot points need to be calculated everyday and this is the next thing to do after reading up on the day’s fundamentals.
The pivot points can be put onto the chart after which you can choose which time frame chart you want to trade. I prefer using the one hour charts to be ideal for now and to keep things simple. Here’s how the chart looks with the trend lines on the H1 chart and the pivot points.
Now from the above set up, we have the following information already. The high and low points (support/resistance) have already been established on the charts. The pivot points give us key areas where price can reverse. However, I add another element to this. I fill the above chart with horizontal lines from the MT4 toolbar, plotting other areas where I think price reversal happened. Now refer to the chart below after plotting these additional levels.
Now with the above information, what I have done is plot all price levels where the price previously hit a high or a low and points where price saw either a push in the trend or a resistance to the prevailing trend. My concept is that because price moves in waves, it is possible that either during a price retracement or extention, the previously support/resistance levels will play a role.
Moving averages play an important role in this trading system. They act as entry/exit points. While it could be possible to place trades based on approaching key support/resistance levels, there is a possibility of price retracement or extensions. Moving averages give out signals based on their cross overs, after a trend is established. This helps us to make more concrete decisions. Here’s the chart with the moving averages now being added. The red line indicates a 14 day moving average and the blue line indicates a 21 day moving average.
So based on the above, we are now able to start trading. Due to the fact that this article has gotten to be quite long, I will cover the next elements of my trading system in my next post.