Help me build a trading system!

I have seen a couple trade systems. In this days I have found a very nice article, which describe the nature of the risk, equity, I can't find that article. In short:

When you sit down to calculator you have a closed equity: no risk-no gain, it is your balance: 1000$.

When you open a position of 30,000 units with 100:1 leverage, than you are using 300$,1000-300=700 is free margin.
If you aren't using any SL, than the SL is the -100 pip Margin Call for the 300$ In this case the risk free equity is the 700$
Lets be there a 50pip SL. Than the risk free equity is the 700 + (300/2) = 850$
Let be the happy case and the price move in our direction 60 pip:+180$. Our total equity is 1180$ ( if we close the position now than that will be the balance, closed equity).
Lets move the SL to BE + 10 pip: so for sure we won the 10 PIP -if the SL is executed without slippage and so on- the risk free equity is 1030$, the total is 1180.

The system has more heat as more is the difference between the risk free equity and the total equity.

Here it comes the building a millipede, building positions systems: start small with 0:1 leverage, loosing bad trades, allowing good ones to run. In this case depends very much if the SL of the position is moved up or not. The system will heat, if not. If no room to play than less will be the good trades number.

The "set and forget" style is a set and pray actually.

In any system when we are right, than higher is the leverage than better is.

The "problem" and the general it is: when the price move against us -a bit. Can be at start, can be after hard earn green pips. INHO is almost the same: total equity loss, closer to risk free equity.

This will lead again to the trade size optimisation, which I have solved already at least theoretically. In practice still has effect on me if the 3-4th consecutive loss it was with the optimised leverage and I am at wrong side of the statistics and need a huge effort to recover from 25% the account even if I am getting up with +20-30% steps.(with 65% win rate the optimum risk should be 30% at least theoretically). Many big traders has used huge leverage and vent bankrupt a few times until they made 100 million. Those systems has a huge heat.

A very cold system with only +5% average return /month (79.59%/year)in 8 years is making +10,718%, around 100x. That is good for pension plan, or when the capital is high enough and don't want to risk it.

Now the question it is: when to mix the higher heat style with a cold one? - simply I am human and need room to play, I am not robot to execute orders, rules with 100% precision.

Mostly I am watching only one currency pair, because no time to analyze news, charts. I am trying to find a trend directional movements based on this chart:


This was one of the most trade improvement material read ever, and I have saved it, I think not available any more online. I will post later the article here.

My system in practice:

Sign marked with 3x up it means using maxed leveraged allowed by Dukascopy: 30:1, sign with red down it mark of close trade.

When I can't trade in this style, than I am doing what I am regretting later... - going to 5m chart and play with 2:1 , 8:1 leverage for 10-30 pip and all beginner stuff. Sometimes bring me some cache, sometimes just using my margin. That's why it was important to move from Oanda, because they introduced the FIFO and no hedge possibility.

Mostly I am watching the news releases. The result should have none change or trend direction impact to use high leverage. So I am not trading only based on chart, no system will be for me with " No news releases", because that is the motor. Also can't trade only on high impact news because those are rare, which has real power of trend change and I don't understand those financial words. Mostly ECB and FOCM statements are this king of imprevisible changes, not NFP, unemployments. Even if I don't understand a news written in financial language, I can see how the market reacts, I see the comments, which are more close to trader language. I can see if EUR/USD just changed direction and just moved 200 pip instead of 70-100 and so on.

I know I should find my system, maybe I need to change too, probably I will, when I will have more capital to trade full time ( around 1 year need to work very-very hard ( over 12h/day ) and trading in smoke breaks, lunch break, work time, when really-really need 5-15 min max to read a news an make my position.

As I read my post I should play with the Trailing Stop, to cool down the system, and protect my wins. I am very satisfied if I catch 40 pip from 100 pip movement, or 200 pip from 500, if I don't have to long red pips at equity.

Also it would be wise to stay out of market and watch how a few pip is going which I couldn't catch than be blocked with a huge size position in negative and pray to be once finally at BE!

I would like to have an enough dynamic system for me, even combined from several posts.

Edit:
found the article:
here
http://www.forexfactory.com/attachme...0&d=1360781599
Thanks for try to help!

The promised article:

The Psychology of Commodity Price Movement
The price of a futures contract is the result of a decision on the part of both a buyer and a seller. The buyer believes prices will go higher; the seller feels prices will decline. These decisions are represented by a trade at an exact price.

Once the buyer and seller make their trade, their influence in the market is spent — except for the opposite reaction they will ultimately have when they close the trade. Thus, there are two aspects to every trade: 1) each trade must ultimately have an opposite reaction on the market, and 2) the trade will influence other traders.

Each trader's reaction to price movements can be generalized into the reactions of three basic groups of traders who are always present in the market: 1) traders who have long positions; 2) those who hold short positions; and 3) those who have not taken a position but soon will. Traders in the third group have mixed views on the market's probable direction. Some are bullish while others are bearish, but a lack of positive conviction has kept them out of the market. Therefore, they also have no vested interest in the market's direction.

The impact of human nature on futures prices can perhaps best be seen by examining changing market psychology as a typical market moves through a complete cycle from price low to price low.

Classic price pattern
Assume prices trade within a relatively narrow trading range (between points A and B on the chart). Recognizing the sideways price movement, the "longs" might buy additional contracts if the price advances above the recent trading range. They may even enter stop orders to buy at B, to add to their position if they should get some confirmation the trend is higher. But by the same token, recognizing prices might decline below the recent trading range and move lower, they might also enter stop loss orders below the market at A to limit their loss.

The "shorts" have exactly the opposite reaction to the market. If the price advances above the recent trading range, many of them might enter stop loss orders to buy above point B to limit losses. But they, too, may add to their position if the price should decline below point A with orders to sell additional contracts on a stop below point A.



The third group is not in the market, but they are watching it for a signal either to go long or short. This group may have stop orders to buy above point B, because presumably the price trend would begin to indicate an upward bias if point B were penetrated. They may also have standing orders to sell below point A for converse reasons.

Assume the market advances to point C. If the trading range between points A and B has been relatively narrow and the time period of the lateral movement relatively long, the accumulated buy stops above the market could be quite numerous. Also, as the market breaks above point B, brokers contact their clients with the news, and this results in a stream of market orders. As this flurry of buyers becomes satisfied and profit-taking from previous long positions causes the market to dip from the high point of C to point D, another distinct attitude begins working in the market.

Part of the first group that went long between points A and B did not buy additional contracts as the market rallied to point C. Now they may be willing to add to their position "on a dip." Consequently, buy orders trickle in from these traders as the market drifts down.

The second group of traders with short positions established in the original trading range have now seen prices advance to point C, then decline to move back closer to the price at which they originally sold. If they did not cover their short positions on a buy stop above point B, they may be more than willing to "cover on any further dip" to minimize the loss.

Those not yet in the market will place price orders just below the market with the idea of "getting in on a dip."

The net effect of the rally from A to C is a psychological change in all three groups. The result is a different tone to the market, where some support could be expected from all three groups on dips. (Support on a chart is denned as the place where the buying of a futures contract is sufficient demand to halt a decline in prices.) As this support is strengthened by an increase in market orders and a raising of buy orders, the market once again advances toward point C. Then, as the market gathers momentum and rallies above point C toward point E, the psychology again changes subtly.

The first group of long traders may now have enough profit to pyramid additional contracts with their profits. In any case, as the market advances, their enthusiasm grows and they set their sights on higher price objectives. Psychologically, they have the market advantage.

The original group who sold short between A and B and who have not yet covered are all carrying increasing losses. Their general attitude is negative because they are losing money and confidence. Their hopes fade as their losses mount. Some of this group begin liquidating their short positions either with stops or market orders. Some reverse their position and go long.

The group which has still not entered the market — either because their orders to buy the market were never reached or because they had hesitated to see whether the market was actually moving higher — begins to "buy at the market."

Remember that even if a number of traders have not entered the market because of hesitation, their attitude is still bullish. And perhaps they are even kicking themselves for not getting in earlier. As for those who sold out previously-established long positions at a profit only to see the market move still higher, their attitude still favors the long side. They may also be among those who are looking to buy on any further dip.

So, with each dip the market should find the support of 1) traders with long positions who are adding to their positions; 2) traders who are short the market and want to buy back their shorts "if the market will only back down some"; and 3) new traders without a position in the market who want to get aboard what they consider a full-fledged bull market.

This rationale results in price action that features one prominent high after another and each prominent reactionary low is higher than the previous low. In a broad sense, it should appear as an upward series of waves of successively higher highs and higher lows.

But at some point the psychology again subtly shifts. The first group with long positions and fat profits is no longer willing to add to its positions. In fact they are looking for a place to "take profits." The second group of battered traders with short positions has finally been worn down to a nub of die-hard shorts who absolutely refuse to cover their short positions. They are no longer a supporting element, eagerly waiting to buy the market on dips.

The third group of those who never quite got aboard the up-move become unwilling to buy because they feel the greatest part of the upside move has been missed. They consider the risk on the downside too great when compared to the now-limited upside potential. In fact, they may be looking for a place to "short the market and ride it back down."

When the market demonstrates a noticeable lack of support on a dip that "carries too far to be bullish," this is the first signal of a reversal in psychology. The decline from point I to point J is the classic example of such a dip. This decline signals a new tone to the market. The support on dips becomes resistance on rallies, and a more two-sided market action develops. (Resistance is the opposite of support. Resistance on a chart is the price level where selling pressure is expected to stop advances and possibly turn prices lower.)

The downturn
Now the picture has changed. As the market begins to advance from point J to point K, traders with previously-established long positions take profits by selling out. Most of the hard-nosed traders with short positions have covered their shorts, so they add no significant new buying impetus to the market. In fact, having witnessed the recent long decline, they may be adding to their short positions.

If the rally back toward the contract highs fails to establish new highs, this failure is quickly noticed by professional traders as a signal the bull market has run its course. This is even more true if the rally carries only up to the approximate level of the rally top at point G.

If the open interest also declines during the rally from J to K, it is another sign it was not new buying that caused the rally but short covering.

As profit-taking and new short-selling forces the market to decline from point K, the next critical point is the reactionary low point at J. A major bear signal is flashed if the market penetrates this prominent low (support) following an abortive attempt to establish new contract highs.

In the vernacular of chartists, a head-and-shoulders reversal pattern has been completed. But rather than simply explaining away price patterns with names, it is important to understand how the psychology of the market action at different points causes the market to respond as it does. It also explains why certain points are quite significant.

In a bear market, the attitudes of the traders would be reversed. Each decline would find the bears more confident and prosperous and the bulls more depressed and threadbare. With the psychology diametrically opposite, the pattern completely reverses itself to form a series of lower highs and lower lows.

But at some point, the bears become unwilling to add to their previously-established short positions. Those who were already long the market and had refused to sell higher would eventually be reduced to a hard core of traders who had their jaws set and refused to sell out. Traders not in the market who were perhaps unsuccessfully attempting to short the market at higher levels will begin to find the long side of the market more attractive. The first rally that "carries too high to be bearish" signals another possible trend reversal.

With this basic understanding of market psychology through three phases of a market, a trader is better equipped to appreciate the significance of all technical price patterns. No one expects to establish short positions at the high or long positions at the low, but development of a feel for market psychology is the beginning of the quest for trades that even hindsight could not improve upon.

When you analyze charts, approach them with the idea that they reflect human ideas about prices that are the result and the struggle between supply and demand forces. Your attitude and ability to judge market psychology will determine your success at chart analysis. Unexpected occurrences can change price trends abruptly, and without warning. Also, some of the chart formations may be hard to visualize. You'll sometimes need a good imagination as well.

http://www.forexfactory.com/attachme...5&d=1357550086

http://www.forexfactory.com/showthre...52#post6396752

I think this thread can be closed.

Why do you think the thread should be closed?

If you would waste a lot of time as visting the ling and reading those posts, than for you too it would be clear.


- I don't know why I am expecting from somebody to read more than 4 lines before the think he will write a response for the content...

See i know how you feel, my approach to the market is almost completely identical to yours, i use trendlines, psychological support and resistance and some other tools but the number 1 thing that helps me is understanding trader psychology i tell you when trading the chart seem to be like movie to me coz the pyshcology tells you stories about what the market has done and is likely to do in the future.
Candlestick patterns and formations like the hammer, hannging man, doji and the like let you in on current market sentiments on the time frame you're trading.
I know how much work you must have put in to makes those post because unlike a $97 forex trading system explaining this concept and approach to trader just isn't easy when you're not physically being tutored, anways thanks for the help and lets try to keep this thread alive even if it just us showing our trades now. just a suggestion. thanks.
http://www.streetarticles.com/day-tr...-chart-pattern
http://www.streetarticles.com/day-tr...trading-market

Here is the system.

Thread closed, Holy Grail, System Found!

As an important post: http://www.forexfactory.com/showthre...76#post6931576