Build Your Trading System in Six Steps

In this section we'll give you a rough picture of what a trading system should look like. This should give you an idea of what you should be looking for when you develop your system.

Trading Setup

• Trade on daily chart (swing trading)
• 5 SMA applied to the close
• 10 SMA applied to the close
• Stochastic (14,3,3)
• RSI (9)

Trading Rules

Entry Rules

Enter long if:

• The 5 SMA crosses above the 10 SMA and both stochastic lines are heading up (do not enter if the stochastic lines are already in the overbought territory)
• RSI is greater than 50

• The 5 SMA crosses below the 10 SMA and both stochastic lines are heading down AND (do not enter if the stochastic lines are already in oversold territory)
• RSI is less than 50

Exit Rules

• Exit when the 5 SMA crosses the 10 SMA in the opposite direction of your trade OR if RSI crosses back to 50
• Exit when trade hits stop loss of 100 pips

Okay, let's take a look at some charts and see this baby in action...

1. Mechanical Trading Systems
2. Design Your Trading System in Six Steps
3. Build Your Trading System in Six Steps
4. The 'So Easy It's Ridiculous' System
5. Summary: Creating Your Own Mechanical Trading System

Forex Training in the School of Pipsology