Build Your Trading System in Six Steps

In this section we'll you a rough picture of what a trading system should look like. This should give you an idea of what you should be looking for when you develop your system.

Trading Setup

• Trade on daily chart (swing trading)


• 5 SMA applied to the close


• 10 SMA applied to the close


• Stochastic (14,3,3)


• RSI (9)

Trading Rules

Entry Rules

Enter long if:

• The 5 SMA crosses above the 10 SMA and both stochastic lines are heading up (do not enter if the stochastic lines are already in the overbought territory)


• RSI is greater than 50

Enter short if:

• The 5 SMA crosses below the 10 SMA and both stochastic lines are heading down AND (do not enter if the stochastic lines are already in oversold territory)


• RSI is less than 50

Exit Rules

• Exit when the 5 SMA crosses the 10 SMA in the opposite direction of your trade OR if RSI crosses back to 50


• Exit when trade hits stop loss of 100 pips