Creating a Bitcoin Trading System: Indicator Based Bitcoin Trading System

A Bitcoin Trading System refers to a set of bitcoin trading rules that you follow to manage your cryptocurrency trades. These written bitcoin trading 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 trading indicators.

For example, the Stochastic Oscillator indicator can be combined with other bitcoin 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 - MetaTrader 4 Template Bitcoin Trading System Example

Creating a Crypto Trading System - Crypto Trading System Trading Example

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

Seven steps to creating an indicator based bitcoin trading system

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

1. Choose your Bitcoin 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 computer constantly for several hours analyzing 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 bitcoin trader you are.

Bitcoin Chart Time Frames on MetaTrader 4 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 bitcoin trader is to get into the trade as early as possible and take maximum advantage of btcusd 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 and Buy cryptocurrency signal Generated by Moving Average Crossover Bitcoin Trading Method

3. Choose additional bitcoin 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 bitcoin trader from fake-outs.

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

RSI Cryptocurrency Indicator and 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 trading signal and another indicator confirms the trading signal, it is time to enter a bitcoin trade.

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

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

Other bitcoin traders wait until the current btcusd price bar is closed and then enter the bitcoin 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 Trading Signals - how to Generate Bitcoin Trading Signals.

Generating Crypto Trade Signals

For exits, a bitcoin trader can either set an amount he 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 bitcoin trade can exit when the bitcoin technical indicators give an opposite trading signal.

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

5. Calculate risks in each bitcoin trade setup

In Bitcoin, you must calculate your risk for each bitcoin trade. Serious bitcoin 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 Reward to Risk Chart below shows you how:

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

In the first example of Risk to Reward Ratio, you can see that even if your bitcoin trading system only won 50% of your bitcoin trades, you would still make a profit of $10,000. Read more on this bitcoin trading money management bitcoin trading topic: Here Bitcoin Trading Money Management Rules - MetaTrader 4 Template Bitcoin Trading System and Bitcoin Trading Money Management Strategies - Template Bitcoin Trading System Example.

Before opening a new bitcoin trade, a bitcoin 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 bitcoin traders just use a pre-determined stop loss to set stop loss crypto orders once they have opened a bitcoin trade transaction.

6. Write down the bitcoin trading 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 ASET OF TRADING RULES which you must follow. If you don't follow the bitcoin trading rules then you don't even have a bitcoin trading 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: Example of Writing Bitcoin Trade Systems Rules

7. Practice on a Demo 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 bitcoin trade system by using it on a demo practice account.

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

It is strongly recommended to start with a demo cryptocurrency trading account and 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 trading account and start trading with real money.