Creating a Gold Trading System: Indicator Based Gold Trading System

A Gold System refers to a set of gold rules that you follow to manage your Gold trades. These gold rules will determine when you open a Gold trade & when you will exit. A Gold trade system is created by combining two or more technical indicators.

For example, the Stochastic Oscillator can be combined with other indicators to form a trading system. For this example stochastics can be combined with the indicators below to come up with the following trading system.

• RSI
• MACD
• Moving Averages XAUUSD Trading Technical Indicator

Example

Creating a Gold System - Gold Trading System Trading Example

So the question is how can a trader create a gold trading systems that works & how does one write its rules? Follow the steps below:

Seven steps to creating an technical indicator based trading system

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

1. Choose your Gold Trading Time-frame

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

Chart Time Frames on MT4 - MetaTrader 4 Gold Trading Software

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

2. Select technical indicators to identify a new trend

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

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

Moving Average Crossover Method - Gold Trading System

Gold Sell signal & Gold Buy signal Generated by Moving Average Crossover Technique

3. Choose additional indicators to confirm the Gold Trading market trend

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

To confirm the signals we use RSI and Stochastic Oscillator.

RSI & Stochastic Oscillator Gold Indicator Trading System

4. Finding entry and exit points

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

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

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

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

Generating Trading Signals

Generating Trade Signals

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

When opening a new Gold trade transaction it's always important to calculate in advance how much you're willing to lose if the Gold Trading transaction goes against you. Although the goal is to create the best gold system in the world, losses are inevitable & therefore being ready to tell where you'll give up & cut your losses before starting a Gold trade is very important.

5. Calculate risks in each XAUUSD trade setup

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

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

The Risk to Reward Chart below shows you how:

Gold Trading Money Management Reward Risk Chart - Gold Trading

In the first examples of Risk to Reward Ratio, you can see that even if your trading system only won 50% of your open Gold trades, you would still make a profit of $10,000. Interpret more on this course: Here Gold Trading Money Management Rules and Gold Money Management Strategies Methods.

Before opening a new Gold trade, a trader should define the point at which he will close the open Gold trade if it turns to be a losing one. Some traders use XAUUSD Trading Fib Retracement Levels and support and resistance levels. Others just use a pre-determined stop loss to set stop loss order once they have opened a Gold trade transaction.

6. Write down the systems gold trading rules & follow them

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

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

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

Next Guide: Example of Writing Trading Systems Rules

7. Practice on a XAUUSD Demo Trading Account

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

Once you have your gold trading system rules written, it's time to test & improve your Gold trade system by using it on a Gold Trading practice trading account.

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

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

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