Then, we use moving averages to help us identify new trends as quickly as possible.
Stochastic helps us to determine whether a good time to open a trade after a moving average crossover, and also helps us avoid oversold or overbought areas.
The RSI is further confirmation that helps us determine the strength of the trend.
After discovering the operation with which we work, we determined the risk of each operation itself. For this system, we are willing to risk 30 pips in each operation. Usually, the longer the period of time to use, more pips you must be willing to risk because the gains will typically be greater than if working with a shorter time period.
Then we have clearly defined our rules of input and output operations. At this point, we begin with the testing phase of our system with a manual verification of results.
If we go back in time and look at this graph, we see that according to our system of rules, this would be a good time to open a long-term operation. To check, write the entry price, stop loss and exit strategy. Then we will move candle by candle, to see what the chart reveals.
In this particular case, you have made a massive gain pips. You can see that when the moving averages cross in the opposite direction is a good time to exit. Of course, not all operations will be as well. Some will look terrible, but you must always remember to be disciplined and stick to your set of rules.
In this example, we see that our approach has been finalized and at this point would open an operation in the short term. Now, we will keep the entry price, stop loss and exit strategy, then the chart will move a candle at a time to see what happens.
Not surprisingly? You can tell that we had stayed in this operation until the moving average RSI cross again to get back to 50.
We know you're thinking that this system is so simple, that not must be profitable. The truth is that it is very simple. You should not scare you with something so simple. In fact, there is an acronym, you'll see constantly in the trading world, and is: KISS. It means "Keep it Simple Stupid" (Keep it simple stupid).
It basically means that operating systems need not be complicated. No need have millions of indicators in your chart. In fact, keep it simple will give you less headaches.
The most important thing is discipline. Always keep clinging to your set of rules.
If you have tested your system in live demo account for at least two months, then you should feel confident with him as much as to feel that if you follow the rules, you end up with long-term gains.
Trust your system and yourself.
