A trading system is a kind of manual, which advises to open or close trading positions based on the results of technical analysis. A trading system allows to exclude the coincidence in the trading process. A strict adherence to the system makes it possible to exclude the emotional factor in the trade. For this reason, one must strictly stick to all recommendations of the system, even if therefore a potentially profitable position will not be opened.
 
The first thing you should do when you are creating a trading system, is to select periods of time and working time frames with which you are going to work. Many of the restrictions in this respect result from the initial capital and the principles of money management. Long-term scheduled periods are accompanied by less "financial noise" than shorter-term periods. The technical analysis, which is used for long-term periods, is more accurate and contains a smaller number of false impulses. Long-term periods are preferable in terms of successful work, but nevertheless they need a higher initial capital. Shorter time periods are characterized by more noise, but still the technical analysis is less accurate and creates more false signals.

In case of a small initial capital, it is not recommended to turn one’s attention to the trade with a long-term time frame, in this case it is better to once try the medium and short-term periods. For longer periods of time, price fluctuations are not that obvious, but actually these fluctuations can be large enough to “consume” the entire initial capital. Therefore, the first restriction to the trade is the initial capital, which determines the choice of the working timeframe.
 
The second task of the trading system is to determine the moment of starting to trade, by means of the technical analysis. In any trade system, irrespective of analytical instruments, the analysis must be started on a long-term basis and then, step by step, pass on to a shorter-term basis. First of all, the current market conditions must be defined within an overall context.

The main task of trading systems is to determine the exit point. Every system should not only deliver the signal to open a position, but also a profit rating. This should be equal to profit-taking. It is also necessary to set the point of stop-loss in case of the market begins to move in another direction. Place the stop-loss order on the same level.

In other words, the trading systems have to define exactly up to which level the position should be kept open, in order to achieve maximum profits, and they have to define mechanisms to stop the loss in the event of contrary market developments.