Sharing some Thoughts on Forex Trading Strategy

trader123 · 07-05-09, 10:41 AM

Recently one of my reader sent an email to me. In the email he said that he used to attend a forex trading course that costs him more than $3000. In the seminar the speaker taught the students how to trade GBPJPY using MACD and Williams. So I asked him if the strategy works? He did not give me a direct and obvious answer, he just told me that my trading skill is better than the speaker's.

I am always skeptical whenever people tells me that using fixed indicators in their forex trading strategy will turn out to be profitable. I can simply perform a quantitative test to prove that using fixed indicators on currency pairs will not work over time. This is because different currencies have different behaviour and this behaviour changes over time as market condition changes. So we cannot use the same indicators for a specific currency pairs for all seasons.

In my view trading strategy can be narrow down into 2 broad categories:
1) Trending following and 2) Reverting to the mean.

1) Trend following strategy means if the trend is up, you follow the direction and buy. If the trend is down, you follow the direction and sell. This is why most people say the trend is your friend. In this case, indicators used for this strategy will be MACD, Parabolic, Bollingerband etc.

Currency pairs that currently belong to this group are EURJPY, EURUSD, USDJPY, GBPUSD.

2) Reverting to the mean strategy means if the price goes up too high, it may be time to sell. Vice versa if the price goes down to much, it is time to buy. In this case indicators used will be Williams, Stochastic, Commodity Channel, RSI etc. If you have been trading long enough, you will know that the trend is NOT always your friend. The trend can be a trap many a times.

Currencies that USED to belong to this group are AUDUSD, NZDUSD, USDCAD. But behaviour of these currencies have changed lately due to market's wild move.

So those traders who had previously been successful in trading AUDUSD using stochastic will face serious damage in his trading lately.

To solve this problem I had developed a system that is flexible. Quantitative tests must be performed on a weekly rolling basis so as to capture the behaviours and patterns of the various currency pairs. Then using the information from the quantitative test to generate buy and sell signals.

I think this is a more realistic and practical way of trading. Most importantly, it works. To receive samples of past trades, send an email to me at metal.commodity@tradingeducationprogram.org.

If you are interested to learn this system, send an email to me at metal.commodity@tradingeducationprogram.org to sign up for our Trading Education Program.

AdamN · 07-05-09, 01:28 PM

Yes, i do agree that fixed indicators on currency pairs will not work over time.
As my trading strategy are market time and news, but i heard that news can also be used as a trap

trader123 · 07-05-09, 08:22 PM

Agree. Nobody can predict what is the result of new announcement, not even those "gurus" from CNBC.

Trader Rich · 16-05-09, 08:19 PM

Well said. Fixed indicators or those seminars are never the answer to the real forex technical analysis. You can't learn how to trader through seminar holders, they make money by talking instead of trading. Real successful traders just don't have time to talk that much.

07-05-09, 10:41 AM	#1
trader123 Senior Member Join Date: 7th June 2008 Posts: 209	Sharing some Thoughts on Forex Trading Strategy Recently one of my reader sent an email to me. In the email he said that he used to attend a forex trading course that costs him more than $3000. In the seminar the speaker taught the students how to trade GBPJPY using MACD and Williams. So I asked him if the strategy works? He did not give me a direct and obvious answer, he just told me that my trading skill is better than the speaker's. I am always skeptical whenever people tells me that using fixed indicators in their forex trading strategy will turn out to be profitable. I can simply perform a quantitative test to prove that using fixed indicators on currency pairs will not work over time. This is because different currencies have different behaviour and this behaviour changes over time as market condition changes. So we cannot use the same indicators for a specific currency pairs for all seasons. In my view trading strategy can be narrow down into 2 broad categories: 1) Trending following and 2) Reverting to the mean. 1) Trend following strategy means if the trend is up, you follow the direction and buy. If the trend is down, you follow the direction and sell. This is why most people say the trend is your friend. In this case, indicators used for this strategy will be MACD, Parabolic, Bollingerband etc. Currency pairs that currently belong to this group are EURJPY, EURUSD, USDJPY, GBPUSD. 2) Reverting to the mean strategy means if the price goes up too high, it may be time to sell. Vice versa if the price goes down to much, it is time to buy. In this case indicators used will be Williams, Stochastic, Commodity Channel, RSI etc. If you have been trading long enough, you will know that the trend is NOT always your friend. The trend can be a trap many a times. Currencies that USED to belong to this group are AUDUSD, NZDUSD, USDCAD. But behaviour of these currencies have changed lately due to market's wild move. So those traders who had previously been successful in trading AUDUSD using stochastic will face serious damage in his trading lately. To solve this problem I had developed a system that is flexible. Quantitative tests must be performed on a weekly rolling basis so as to capture the behaviours and patterns of the various currency pairs. Then using the information from the quantitative test to generate buy and sell signals. I think this is a more realistic and practical way of trading. Most importantly, it works. To receive samples of past trades, send an email to me at metal.commodity@tradingeducationprogram.org. If you are interested to learn this system, send an email to me at metal.commodity@tradingeducationprogram.org to sign up for our Trading Education Program.

Thread Tools
Show Printable Version Email this Page
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode

07-05-09, 01:28 PM	#2
AdamN Banned Join Date: 27th April 2009 Posts: 55	Yes, i do agree that fixed indicators on currency pairs will not work over time. As my trading strategy are market time and news, but i heard that news can also be used as a trap

07-05-09, 08:22 PM	#3
trader123 Senior Member Join Date: 7th June 2008 Posts: 209	Agree. Nobody can predict what is the result of new announcement, not even those "gurus" from CNBC.

16-05-09, 08:19 PM	#4
Trader Rich Junior Member Join Date: 16th May 2009 Posts: 5	Well said. Fixed indicators or those seminars are never the answer to the real forex technical analysis. You can't learn how to trader through seminar holders, they make money by talking instead of trading. Real successful traders just don't have time to talk that much.