I cannot stress this enough.

You must have a trading system before you can be successful whilst trading cryptocurrencies.

Cryptocurrencies are extremely volatile. Just check the Binance order book. You literally won't see an order for more than a second before it is filled.

For you to be able to make serious money, you need a system that tells you when you'd enter, when you'd exit, when you'd take profits and how much loss you're willing to take.

In this post, I'd go over a few important parts that a trading system must have. And then at the end, we'd build one together!

BUILDING YOUR TRADING SYSTEM

You'd need three defined points:

• Your stop loss amount: Let's face it. We're not perfect. We make mistakes. Our trading plan will have mistakes. I put this as the first and most important factor because it is. You set your stop loss according to how much you wish to lose on a trade. I don't go lower than losing 0.5% on any trade, because if a trade is 0.5% sour, chances are that it isn't a very good trade.
• Your entry point: This will be governed by your rules, and your rules alone. No one can tell you when to enter a trade, because no one else trades on your behalf. Certain things affect this factor, such as if the price is on important supports or if it has reached a resistance already. Buying at the top is equivalent to death (not really:)
• Your exit point: A wise man once said that "it's not entering the trade that counts. It's exiting it." You'd need to set a take profit margin. This margin is based strictly on support and resistance, and has nothing to do with how much you actually wish to make.

With all those in place, you must go through another important step: You must test your plan.

I do something called the "20 trade challenge".

It's a really simple strategy in theory. You simply have to make 20 trades using your trading systems rules on a demo account. The only rule is that "under no circumstances would you trade outside of your rules".

It might seem easy at first, but you'd be surprised that you may not be able to compete the challenge before giving up.

Usually, most trading systems are able to make 50% of all trades profitable, but not following them might reduce that number.

Once you've tested your strategy 20 times, if it turns out more good trades than bad, you can follow the system to victory!

Now let's create a sample trading system using as little indicators as possible.

Please note that you shouldn't use this as a serious system. You could test it though on a demo account.

System name: Short term moving average strategy

System indicators:

• 5 EMA applied to the close
• 10 EMA applied to the close
• Stochastic oscillator

Now on to the rules of the system.

• Entry: Enter only if the 5EMA crosses over the 10EMA from the bottom while Stochastic shows oversold conditions.
• Exit: opposite of entry 
• Stop loss placement: 0.5% below entry
• Take profit placement: First resistance line after entry.

That's a simple strategy! 

Let me know what you think in the comments down below.