Trade Stocks Trading

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MT4 Template Stock Trading System

A Stock Trading System refers to a set of stock trading rules that you follow to manage your stocks trades. These written stock trading rules will determine when you open a stock trade and when you will exit. A stock trade system is created by combining two or more stock technical indicators.


For example, the Stochastic Oscillator indicator can be combined with other stock indicators to form a stocks trading system. For this example - stochastic oscillator can be combined with the stock technical indicators below to come up with the following  stocks trading system.



  • RSI indicator

  • MACD indicator

  • Moving Averages indicators


Example - MT4 Template Stock Trading System Example


MT4 Template Stock Trading System

Creating a Stock Trading System - Stock Trading System Trading Example


So the question is how can a stock trader come up with stock trading systems that work like the stocks trading system example above and how does one write it's stock trading rules? to write the stock trading system trading rules follow the steps below.



Seven steps to creating an indicator based stock trading system

To come up with these set of stock trading rules we use the following seven steps.



1. Choose your Stock Trading Chart Time Frame


This first step depends on how many hours you want to dedicate to stock trading. Whether you prefer sitting in front of the computer constantly for several hours analyzing short stocks trading chart time frames OR you prefer setting up your stock charts using bigger stocks trading chart time frames once or twice a day. Choosing a stocks trading chart time frame will mainly depend on what type of stock trader you are.


MT4 Template Stock Trading Systems

Stock Trading Chart Time Frames on MT4 Stock Trading Software



While testing your new stock trading system you may want to find out about its performance on different stocks trading chart time frames and then choose the most accurate and profitable stocks trading chart time frame for you.



2. Choose indicators to identify a new stock trend


The goal of a stock trader is to get into the trade as early as possible and take maximum advantage of stocks price moves.


One of the common ways to spot a new stock trend as fast as possible is to use Moving Averages Indicator. A simple stock trading strategy is to use a moving average crossover system that will identify a new trading opportunity at its earliest stage.


Moving Average Crossover Method

Sell Stock Trading Signal and Buy stock signal Generated by Moving Average Crossover Method

Sell stock signal and Buy stock signal Generated by Moving Average Crossover Stock Trading Method



3. Choose additional stock indicators to confirm the stock trend


Once we find a new stock trend we need to use additional indicators that will confirm the entry stock signals and give either a green light for action or save a stock trader from fake-outs.


To confirm the stock trading signals we use RSI indicator and Stochastic Oscillator indicator.

RSI Stocks Indicator and Stochastic Oscillator Indicator Stock Trading System Template Example

RSI Stocks Indicator and Stochastic Oscillator Indicator Stock Trading System


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4. Finding stock entry and stock trading exit points


Once stock technical indicators are chosen so that one stock indicator gives the trading signal and another indicator confirms the trading signal, it is time to enter a stock trade.


A Stock trader should enter a stock trade as soon as a stock signal is generated and confirmed after a candlestick closes.


Aggressive stock traders enter a stock trading transaction immediately without waiting for the current stocks price bar to close.


Other stock traders wait until the current stocks price bar is closed and then enter the stock trade transaction if the trade setup has not changed and the stock signal remains valid. This method is more considerate and prevents additional false entries and stock trading whipsaws.


Generating Stock Trading Signals - how to Generate Stock Trading Signals.

MT4 Template Stock Trading Systems

Generating Stock Trade Signals


For exits, a stock trader can either set an amount he wants to earn per trade or use technical stock trading tools that help to set profit goals like Fibonacci expansion tool or set a protective stop loss depending on the stocks trading market volatility at any given time. Alternatively a stock trade can exit when the stock indicators give an opposite trading signal.


When opening a new stock trade transaction it is always important to calculate in advance how much you are willing to lose if the stock trade transaction goes against you. Although the goal is to create the best stock trading system in the world, losses are inevitable and therefore being ready to tell where you will give up and cut your losses before starting a stock trade transaction is very important.



5. Calculate risks in each stock trade setup


In Stock, you must calculate your risk for each stock trade. Serious stock traders will only enter and look to open an order if the risk to reward ratio is 2:1 or more.


If you use a high risk to reward ratio like 2:1, you significantly increase your chances of becoming profitable in the long run.


The Reward to Risk Chart below shows you how:

Example Template Stock Trading System

Stock Trading Money Management Reward Risk Chart - Example Template Stock Trading System


In the first example of Risk to Reward Ratio, you can see that even if your stock trading system only won 50% of your stock trades, you would still make a profit of $10,000. Read more on this stock trading money management stock trading topic: Here Stock Trading Money Management Rules - MT4 Template Stock Trading System and Stock Trading Money Management Strategies - Template Stock Trading System Example.


Before opening a new stock trade, a stock trader should define the point at which they will close the stock trade if it turns to be a losing stock trade. Some traders use Fibonacci retracement levels tool and support and resistance levels. Other stock traders just use a pre-determined stop loss to set stop loss stock orders once they have opened a stock trade transaction.



6. Write down the systems stock trading rules and follow them


A Stock Trade System refers to a set of rules that you follow to manage your stocks trades.


The keyword is ASET OF TRADING RULES which you must follow. If you don't follow the stock trading rules then you don't even have a stock trading system in the first place.

The next stock trading systems lesson shows you an example of how to use the above steps to come up with your own Stock online stock trading system:

Next Lesson: Example of Writing Stock Trade Systems Rules



7. Practice on a Demo Account



Without enough trades, you will not be able to realize the true profitability of your stocks trading system.


Once you have your stock trading system rules written, it is time to test and improve your stock trade system by using it on a demo practice account.


Open a free demo practice account and trade your stock trading system to see how well it will respond.


It is strongly recommended to start with a demo stocks trading account and practice for at least for 1 or 2 months so as to gain some practice and experience how the stocks trading market works.


Once you start making some decent profit on your demo stocks trading account you can then try opening a live stocks trading account and start trading with real money.

 

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