Creating a Bitcoin Trading System: Technical Indicator Based Bitcoin Trading System

A Bitcoin Trading System refers to a set of bitcoin rules that you follow to manage your cryptocurrency trades. These written bitcoin rules will determine when you open a bitcoin trade and when you will exit. A bitcoin trade system is created by combining two or more cryptocurrency indicators.

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

• RSI indicator
• MACD indicator
• Moving Averages indicators

Example - MT4 Template Trading System Example

Creating a Crypto System - Crypto Trading System Examples Template

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

Seven steps to creating an technical indicator based trading system

To come up with these set of bitcoin 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 bitcoin trading. Whether you prefer sitting in front of the Desktop computer constantly for several hours interpreting short crypto chart time frames OR you prefer setting up your crypto charts using bigger crypto chart time frames once or twice a day. Choosing a crypto chart time frame will mainly depend on what type of trader you are.

Chart Time Frames in MT4 Software

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

2. Choose indicators to identify a new bitcoin trend

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

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

Moving Average Crossover Method

Sell cryptocurrency signal & Buy cryptocurrency signal Generated by Moving Average Crossover Bitcoin Trading Method

3. Choose additional indicators to confirm the bitcoin trend

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

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

RSI Cryptocurrency Indicator & Stochastic Oscillator Bitcoin Indicator System

4. Finding crypto entry and bitcoin trading exit points

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

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

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

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

Generating Bitcoin Signals - how to Generate Trading Signals.

Generating Crypto Trade Signals

For exits, a trader can either set an amount that wants to earn per trade or use technical bitcoin trading tools that help to set profit goals like Fibonacci expansion tool or set a protective stop loss depending on the btcusd trading market volatility at any given time. Alternatively a trader can exit when the technical indicators give an opposite trading 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 bitcoin trading system in globe, losses are inevitable and therefore being ready to tell where you will give up and cut your losses before starting a bitcoin trade is very important.

5. Calculate risks in each bitcoin trade setup

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

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

The Risk to Reward Chart below shows you how:

Crypto Money Management Reward Risk Chart - Examples Template Crypto Trading System

In the first example of Risk to Reward Ratio, you can see that even if your trading system only won 50% of your trades, you would still make profit of $10,000. Read more on this bitcoin trading money management bitcoin trading topic: Here Bitcoin Trading Money Management Rules - MT4 Template Trading System and Bitcoin Trading Money Management Methods - Template Trading System Example.

Before opening a new bitcoin trade, a trader should define the point at which they will close the bitcoin trade if it turns to be a losing bitcoin 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 crypto orders once they have opened a btcusd trade transaction.

6. Write down the bitcoin systems rules and follow them

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

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

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

Next Lesson: Examples of Writing Bitcoin Trade Systems Rules

7. Practice on a Practice Account

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

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

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

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

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