Trading systems for total beginners

To move towards trading profitably, Brygida, you’ll have [U]much[/U] better chances if you give up indicators, and learn “price action” techniques, in my opinion.

I come from a “trading family background” and have now been trading for a decade (including an initial 4-year period of studying, watching, learning and using demo accounts only), and for the last two years of that, after an enormous amount of trading education, research and practice, I’ve fairly steadily earned from it what most people would consider a very good living (that’s how much work I put into it, albeit part-time, to achieve it - even with my background); like many people in similar positions, my trading became consistently profitable only when I eventually [U]abandoned[/U] the pursuit of indicator-based systems. I urge you to do the same, and the sooner the better.

I’m happy to recommend books to you, now or later, if that helps.

Ok, subject to the comments above, I’ll answer it. :wink:

Here’s the safest, most sensible forex system I’ve seen with entry parameters based on moving averages, stochastics and an RSI.

[U]Chart set-up[/U]:
[U]M10 forex bar charts[/U] during their main trading hours (e.g. EUR/USD and/or GBP/USD when either Europe or New York is in its normal business hours, but avoiding the opening of sessions by half an hour and their closing by an hour; choose only pairs with low spreads, such as GBP/USD and EUR/USD during their appropriate sessions)
[U]Simple moving averages[/U]: 6 and 18 periods
[U]RSI[/U]: 10 periods with a horizontal line drawn at 50 (if your charting software requires two levels to be specified, just put “50” for both of them)
[U]Full stochastic[/U]: settings 5-2-2 with horizontal lines drawn at 62 and 38

[U]Entries[/U]:
Enter long at the start of the next M10 bar after an M10 bar has [I]closed[/I] with the fast moving average having crossed up above the slow moving average while both moving averages are rising (i.e. “no dead crosses”), and the RSI is above 50 and rising, and both lines of the stochastic are above 62.
Enter short at the start of the next M10 bar after an M10 bar has [I]closed[/I] with the fast moving average having crossed down below the slow moving average while both moving averages are declining (i.e. “no dead crosses”), and the RSI is below 50 and falling, and both lines of the stochastic are below 38.

[U]Management[/U]:
Stop-loss fixed at 9 pips
Take profit fixed at 15 pips

[U]Position-sizing[/U]:
Expose to risk no more than 1% of your trading capital per trade (value per pip is such that a 9-pip loss will lose only 1% of your funds)

[U]Notes[/U]:

  • The indicators are used only to open trades, not to close them. Once a trade is opened, ignore them (or take them off the chart).
  • Don’t trade around news announcements that might be relevant to either/both of the currencies you’re trading.
  • Don’t decide to increase the position-size after a good run of trades (and not after a bad run, either!).
  • It’s ok to trade it on slower charts than M10, too (probably not on faster ones), and it might be ok to increase the TP and SL (on a [I]pro rata[/I] basis, according to current volatility), if you do.
  • If you trade it on slower charts, you’ll get fewer trades but their overall win-rate should be higher.
  • You need [B]all 4[/B] of the entry parameters to be fulfilled (MA crossover; MA’s both rising/falling; RSI above/below 50 and rising/falling; both stochastic lines above 62/below 38) - if one of them isn’t wait until the [I]close[/I] of a bar has confirmed that all 4 conditions are fulfilled before entering: that’s important, because all these indicators “repaint”.
  • You need to win only 37.5% of your trades, with this system, to break even: any win-rate higher than that will be profitable.
  • Edited to add: there are other pairs you can trade with it, too, as long as they’re active when you try: USD/CHF, USD/CAD, AUD/USD (beware high spreads), EUR/JPY, USD/JPY, but not GBP/JPY.
  • Don’t open multiple trades at the same time: once a trade’s open, wait for it to close itself (one way or the other) before opening another.
  • Don’t draw any conclusions about this system, or these indicators, until you’ve faithfully recorded the outcomes of 200 consecutive trades using the system (to do [I][U]any[/U][/I] kind of trading profitably, in the long term, you’ll need the patience and discipline of being able to do at least that).

I don’t say that you’ll necessarily make big profits from this, but it’s about as safe as you’ll get for a simple, multi-indicator system [I][U]using the indicators you requested[/U][/I], and if nothing else, practising it will be [U]really[/U] beneficial towards teaching you the patience and discipline necessary to trade systematically, because every time you try to “bend the rules” it will probably backfire on you. And for that alone, it’s valuable. And good luck!