MT4 Template CFD System

A CFD System refers to a set of cfd rules that you follow to manage your trades. These written cfd rules will determine when you open a trade & when you'll exit. A trade system is created by combining 2 or more indicators.

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

• RSI indicator
• MACD indicator
• Moving Averages indicators

Example - MT4 Template CFD System Example

Creating a CFD System - CFD System Trading Example

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

Seven steps to creating an indicator based trading system

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

1. Choose your Chart Time-Frame

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

Chart Time Frames on MT4 Software

While testing your new trading system you may want to find out about its performance on different chart timeframes and then choose the most accurate & profitable chart timeframe for you.

2. Choose indicators to identify a new trend

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

One of the common ways to spot a new trend as fast as possible is to use MAs Indicator. A simple strategy is to use a MA cross over system that will identify a new trading opportunity at its earliest stage.

MA Crossover Strategy

Sell signal and Buy signal Generated by Moving Average Cross-over CFD Method

3. Choose additional indicators to confirm the trend

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

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

RSI CFDs Indicator and Stochastic Oscillator Indicator CFD Indicator System

4. Finding entry and exit points

Once indicators are chosen so that one indicator gives the signal & another indicator confirms the signal, it is time to enter a cfds trade.

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

Aggressive traders enter a trade transaction immediately without waiting for the current cfds price bar to close.

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

Generating CFD Signals - how to Generate CFD Signals.

Generating Trade Signals

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

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

5. Calculate risks in each trade setup

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

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

The Risk-Reward Chart below portrays you how:

CFDs Money Management Reward Risk Chart - Example Template CFD System

In the first examples of Risk-:-Reward Ratio, you can see that even if your cfd system only won 50% of your trades, you would still make a profit of $10,000. Interpret more on this cfd money management cfd topic: Here CFDs Money Management Guidelines - MT4 Template CFD System and CFDs Money Management Strategies - Template CFD System Example.

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

6. Write down the cfd systems cfd rules and follow them

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

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

The next cfd systems lesson shows you an example of how to use above steps to come up with your own CFD Trading online cfd system:

Next Lesson: Examples of Writing CFD Trade Systems Rules

7. Practice on a Demo Account

Without enough trades, you won't be able to realize the true profitability of your trading system.

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

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

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

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