All over the web are explained the **basic strategies to trade the market** (*Yes, in my blog as well!* “*How to trade the markets trends in the right way*“), the chart patterns, how to identify the Range Markets, the 6 tenets of the Dow Theory and so on..

It is fundamental to learn all these staffs BUT, what is not explained, is:

**How to make money with all these information.**

To **start earning** from your new **knowledge** you will need to build a** Profitable Trading System.**

In order to create** your own successful strategy** you will need to use the **5-W Rule**:

**Who?****What?****When?****Where?****Why?**

Once you have answered all these questions, you will be ready to** start trading** and **making money**.

In this article, I will explain you the **3-steps **to** build a profitable trading system** using the **5-W rule.**

# WHO and WHAT?

To answer this question you need to **define:**

- Your
**Watchlist. [WHO]** - The
**TimeFrame**you want to trade.**[WHAT]**

The **Watchlist **is the list of the pairs you are following and it’s very important to define it for **3 reasons:**

- You will
**WAIT**for signals instead of the**look for them.** - You are
**FOCUSED****will learn their behaviour**and particularity. - You can
**get a statistic**of how your system performs on each pair and**optimize it.**

My **Watchlist** is done by **16 pairs** and it includes all the crosses between **Usd, Gbp, Eur, Aud, Nzd, Jpy. **The **TimeFrame** is the **Daily.**

# The CONDITIONS [Where and Why]

By answering the questions **Where **and **Why **you are defining the **Trading Conditions.**

A **Trading Condition **is a **Market Price **or **Situation** where there is a **higher probability** of a **trend reversal **or **continuation.**

A few examples of a trading condition are:

- Support and Resistance.
**Chart Patterns**.- A
**divergence**on a Momentum Indicator. - The direction of a
**Long Hurst Cycle.**(

*That you can spot with the***7 cyclical indicators***included in the***Hurst Cycles Course**!)

My favourite trading condition is the **direction of the trend** (*“Trend is your friend!”) *and **Support & Resistance.**

# The Entry Signal [WHEN]

Once you have defined your **Trading Condition**, in order to **build a profitable trading system**,** **you will need to define an **entry signal** which tells you **when to open a position.**

Some examples of** Entry Signals** are:

**Breakout**of a Support, Resistance or a Trendline.- A Stochastic
**CrossOver.**(K with D). - The Reversal of a
**Short Cycle**.

In this screenshot, I’m using as condition a **Cyclical Indicator **with input **192 periods** as **condition** and another **Cyclical Indicator **with input **24 periods** as **entry signal** in when this **short cycle** reverses in the direction of the **bigger trend.**

# BONUS: Money Management

This third step is not included but in the **5-W Rule**, but it's **important exactly as the previous steps.**

Before you open any position you have to know:

**1) How much you want to risk.
**You can choose between three methods:

**Fixed percentage**.- Fixed lot.
- Another formula such as Kelly.

I strongly recommend using the **Fixed Percentage method** risking no more than the **5% of your equity**

This is the formula:

**Number of units** = (Equity***%RISK**)/Pips of the stopLoss/Value of pips.

**2) How much you want to Earn.
**This point defines

**where**you place your

**take profit,**the ratio between

**your risk**and

**your profit**is called

**Risk:Reward.**

A **High Risk:Reward **is the** holy grail of trading. **Make sure you place your **take profit** around, at least, twice the amount of pips of your **StopLoss. (Risk:Reward > 2).**

Here how the profitability of a system changes with the increase of the Risk:Reward.

The **%Win **of this System is **30%.**

With a **Risk:Reward = 1 **the profit is **-60%, **but with a **Risk:Reward = 2,5** even with a small **%win **as **30%, **the trading system shows a **profit of 45%.**

Here you are the **secret of a profitable trading strategy**.

# Ready to trade the Hurst Cycles?

In the **Trade Hurst Cycle Course** you will find **3 trading system **ready to use with:

**Condition****Entry Signal****Money Management.**

## Find it HERE:

"The **HURST CYCLES** Course"

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