Within the last few months I have been building several trading systems that are produced by utilizing a set of very simple trading indicators. The good thing of it is that many of them are very profitable and simple to use. Last week I back tested a collection of free Forex software tools that have made a total of 185% in the last Twelve months by trading only 1% per trade.
I actually found this trading strategy when I was testing a number of Forex indicators and trying to find good mixtures of lagging and leading indicators. After testing about a hundred of them I was able to find a set of indicators that was in fact being profitable.In this post I will be trying to explain to you 4 simple tips on how you can also create effective trading systems that can be make 180% ROI and much more per year.
Look for a mix of indicators that makes sense:
When you are looking for new trading strategies you will have to look for indicators that work well with one another. As an example, I usually use a mix of lagging and leading indicators.
Why? Because I want to have the ability to take advantage of the early signals some indicators provide along with the verification signals indicators such as RSI can provide.
In addition, I always make sure that the signals I am receiving from my set of indicators are not too weak. The best way to measure the strength of a signal is by forward testing it (with a demo account, never with real money) and evaluate the way they perform.
Put together indicators that can measure the strength of the movements and another one that verifies the market’s intention:
This is an essential part when you develop a trading system. If you only use indicators that measure the strength of the market it will be hard to determine when to enter the market. On the other hand, if you only use indicators that help you to identify the market’s intention (for example: the market is about to go in an uptrend or a downtrend.
Backtest the trading system for at least 12 months:
Backtesting is the only technique to confirm that your trading system actually works. Lots of strategy developers and investors commit the mistake to only back test a trading strategy for a few months or days. This is a serious mistake because anyone who has been trading for a while knows that every trading system has negative and positive months. In some months I have made as much as 50% ROI, in a bad month I have had a -7% or a -5%. If you only test your system for 2-3 months how do you know that you didn’t just catch the good months with your backtesting. Then, if the system is not as profitable as you thought, you will be confused and disoriented when it starts to lose you money. For this reason I suggest to back test a trading strategy for a minimum of 6 months (if you back test it for 1 full year is even better)
Develop a group of money management and risk management rules for the system:
As a final point you need to create a set of money management techniques and strategies to go with your trading strategy. Also, it is vital that you apply your money management techniques while you are backtesting your free Forex software system.
Great tips. All these points are quite simple and easy to follow. I am extremely happy and excited to learn all these nice points. I will do try to implement the same to generate such a handsome return.
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