Find the reasons how backtesting became the only reasonable way to trade smart.
Intrigued? Keep reading and learn more.
What does make the difference between a lucky guess and a profound trading? Are you sure, your trading style is more than just flipping a coin and expecting the positive outcome?
Or probably you are overwhelmed by the quantity of the trading strategies on the Internet promising to bring a fortune? Want to know how to avoid a desperate confusion when the “simple” strategies only drain your live trading account? (read more).
We are back again to RSI, but accompanied with the Moving Averages this time.
Our choices are the strategies easy to understand for the beginner traders, but at the same time attractive for the more advanced ones.
We believe this trading strategy is one those, but only backtesting can reveal all strong and weak sides of the strategy (read more).
As we loved Awesome Oscillator in action, we proposed another trading strategy using this indicator, but accompanied with the RSI indicator this time. Let us check how powerful these two can be together and either such combo of the indicators will make our trading decisions more precise.
The combination of these two popular indicators believed to make the strategy applicable almost for any trader – it is simple to understand even for the beginners (read more).
As we loved Awesome Oscillator in action, we proposed another trading strategy using this indicator, but accompanied with the RSI indicator this time. Let us check how powerful these two can be together and either such combo of the indicators will make our trading decisions more precise (read more).
Till now we have tried various indicators in pairs and combinations.
However, can the indicator stand alone and still be enough for the prediction of the next movements of the market? This time we put Stochastic Indicator all alone to the test. Read further and learn how it turned to be – profitable or not.
It should be one of the simplest strategies ever, but can it leave the trader with profits? (read more).
We have tested a line of the well-known indicators and now it is time to try the Parabolic SAR indicator.
As it is better to use the combination of the indicators for signals confirmation, we compliment the Parabolic SAR with the Moving Averages (read more).
Confused by the tones of the trading strategies flooded the Internet? Tired of believing another ‘trading guru’ about the next ‘the most profitable trading strategy ever’?
We have backtested popular trading strategies so you wouldn't have to! Save your time and enjoy the reading!
We’d love to start with the indicator that gained love and respect of the millions of traders – MACD Indicator (read more).
The next pair in the row to try is the ADX indicator accompanied by the Moving Average. Can this pair of indicators show better results than the previous ones? What are the best settings for ADX to perform with?
Intrigued? Read the results ...
We have tried MACD in different combinations and the same for ADX. Let’s check how these two indicators work together. What are the best settings for those two widely-used indicators in order to highlight their best sides?
We can learn only while backtesting them through different markets and parameters.
Keep reading and learn the results ...
Remember «EMA (5) + EMA (12) + RSI (21)» trading strategy we have backtested manually some time ago? Here you can find the results of the manual backtesting and check either it turned out to be profitable or not.
Now we are back to backtesting of this strategy: this time in the automated mode and with different parameters. Let’s check how to make this strategy bring profits and what are the best settings for this.
Keep reading and learn the results ...
A script for the test was created in Visual Strategy Builder. Tests were carried out in Forex Tester 4 on the GBPUSD currency pair and H1 timeframe. The initial deposit is $100,000; the leverage is 1:100; the minimum transaction volume is 1 lot. The “Bars to skip” parameter defines the search range of a trading signal (in bars).
All transactions are open and fixed automatically. Test period is from 01/01/2017 to 08/07/2019. Set of quotes is from the FXCM broker. Four tests were performed: a reverse test and three options with a fixed stop. For analysis, only test statistics are used.
Keep reading and learn the results ...
While determining the direction of the trend and points of change is essential for entering the market, one of the bigger challenges facing the trader is to find out when the sentiment has changed.
When it comes to determining the earliest reversal of trend direction, one should look at using Renko charts (read more).
According to Williams, Awesome Oscillator, evaluating dynamics of the price movement − the most effective element in his trade system Profitunity.
Even if you not the fanatic of the wave market theory, it will be very useful to see accurately wave pieces in the market to enter the market after the termination of an old wave in an optimum point of the new (read more).
We offer classical option for sure trade.
The Alligator indicator uses the idea of the moving average and the theory of fractals in the original interpretation of Bill Williams.
The author's description in books «Trading Chaos: Maximize Profits with Proven Technical Techniques» and «New Trading Dimensions…» in general coincides with the mechanism of the modern tool (read more).
The science of chaos means much more than a just new trading approach.
It is an entirely different way of viewing the market, that until the mid-1980s, we didn’t have the computing power needed to deal with on a mathematical basis.
Applying rigorous mathematical thinking to complex forms, chaos theory is the first technique that successfully models turbulent price flows (read more).
In trading, a moving average is defined as a product of adding up the prices for a given interval and then dividing the sum by that interval. Simple moving averages are effective for the analysis of trend and used extensively in algorithmic trading systems.
They are also appropriate for determining the support and resistance levels.
One can use a single moving average or combine a few different ones to plot on their charts (read more).
It is necessary to clearly understand who is currently stronger: «bulls» that provide a price increase, or «bears», pushing the price down.
The right choice of «colleagues on a trend» considerably increases chances of success (read more).
In a pursuit of profit, we often do not notice the standard tools capable to simplify the routine engineering analysis without loss of quality of signals.
We offer dynamic trend Moving Average of Oscillator (OSMA). The indicator evaluates a difference between the value and its smoothing, and on the basis of it draws conclusion about force of the current tendency (read more).
Article on RVI appeared in the S&C magazine in January 2002, and the credibility was provided by the author John Ehlers − the best expert in the use of cycles in technical analysis.
An Indicator of the «confidence» about the trend continuing has long proved to be effective (read more).
Though the WPR indicator (Williams%R or Williams Overbought/Oversold Index) bears a name of famous Larry Williams, this author is George Lane − the developer of the classical Stochastic oscillator. For the first time the indicator is mentioned in the book «How I made one million dollars last year trading commodities» , where its anticipated signals of a turn are actively advertised (promoted) (read more).
One more element of the well-known Theory of Trade Chaos analyzes how attractive the asset is to financial market participants. Except for dynamics of the price, the MFI indicator, in addition, considers market volume that, according to Bill M.Williams, allows you to see how fast money «enters and leaves the market» (read more).
The revolutionary idea of Bill M.Williams reveals that trade volume is the main driver of the price’s movement. The correct analysis of the «relations» volume/price gives a clear understanding where (and how attentive!) the market is «watching» at the moment. And the MFI indicator, together with other developments of the author, has to be one more assistant to the trader in fight for profit (read more).
The MACD indicator is a variation of the moving average crossover and represents a smoothed difference between two exponential moving averages.
The moving average convergence-divergence is one of the most potent technical tools in trader’s arsenal.
It is also one of the simplest and extremely versatile, as it can be used both to trade trend and the range.
The moving average convergence-divergence indicator is based on the insight that more can be learned about price behavior from the interaction between moving averages than from the moving averages themselves (read more).
The first mentioning of CCI or index of the commodity channel appeared in October 1980, when Donald R. Lambert published analytical article in the journal Commodities.
The author successfully worked in commodity markets, experimented with the analysis of volatility and developed the Сommodity Сhannel Index almost by accident − to test the hypothesis of a cyclical price. Today this indicator has become an indispensable element in the arsenal of any active trader (read more).
Financial journalist Dan Valcu on his website says that in the summer of 2003, when studying the methodology of Ichimoku Kinko Hyo, he accidentally discovered diagrams with an unusual trend picture developed by an unknown stock trader.
Attempts to adapt this method to Japanese candles turned out to be so profitable that the program code of the indicator Heiken Ashi was developed prior to the presentation in the press (read more).
Hybrid indicator Traders Dynamic Index, the algorithm of which was created by the usual trader Dan Malone, performs a full-fledged market analysis: in addition to the direction and strength of the trend, it allows you to effectively assess volatility.
Despite the fact that the author's strategy of Trading Made Simple was scalping (on M5-M15), practice proves that the indicator’s signals are effective on any timeframe and trading asset (read more).
In the global trading system of Trade Chaos Williams, Gator Oscillator plays the role of an additional filter of the “sleep” and “hunt” periods for the Alligator, so it is usually used in conjunction with its “big brother”.
Because of the unconventional interpretation, this oscillator can cause misunderstanding among beginners, but the benefit from its application becomes more obvious with some trading experience (read more).
The popular book of the successful analyst and trader Thomas R. DeMark «The New Science of Technical Analysis» was carefully read by few. But practice proves: those who have not regretted the time to study his theory, will always be in profit.
The author created his own technical tools even before the era of the computer revolution − at that time analysts performed most of the calculations manually (read more).
Ichimoku is a Japanese charting technique developed before World War II by a Tokyo newspaper writer, which literally means “one look”, presenting a panoramic view of the market.
It is enjoying renewed popularity and a chart of this style is referred to as Ichimoku Kinkou Hyou — the table of equilibrium prices at a glance.
An Ichimoku chart is a trend-following system with an indicator similar to moving averages. You may wonder how another eastern style charting approach can be different from an already impressive arsenal (read more).
The Acceleration Deceleration indicator is a logical continuation of the Awesome Oscillator of Bill Williams (AO) and implements the idea that before the change of the direction the price changes in the last turn.
Before a turn, the price gradually reduces the dynamics on the current trend, as a result, the trader needs to estimate its acceleration («+» or «-»), which at the time of the actual turn has to be equal to zero (read more).
In fact, indicator ZigZag is a graphics filter to simplify the visual picture of the price movement. It does not modify the price data, performs a minimum of the mathematical calculations and is considered a signal tool for analyzing trend market. (read more).
Remember how many times you have blamed yourself for not leaving the market in time? How often have youclosed a deal too soon? Stop wandering in the fog! The ADR indicator will help you to see a current goal constantly, andcontrol your way to a profit. (read more)
If you agree with the classics and think that «trend is my friend», then we recommend you to perceive the marketvolatility as favorable (but sometimes – very dangerous!) business partner. Get acquainted – the ATR indicator! It will help younot only to earn, but also to avoid a loss in time. (read more)
In the financial market (the same as in life!), those who want to buy cheaper, are constantly fighting for moneywith those who intend to sell more expensive. The current price is a victory of one of the parties. We offer you the Bulls Powerand Bears Power indicators to monitor the intermediate results of this war. (read more)
Striving for an optimal price is the main impetus to the financial market movement. To those who prefer trading in range, the Envelopes indicator suggests one more variant of the dynamic price channel that realizes the idea of the price return after speculation − to the average value and a stable trend. (read more)
The definition of the most probable price range is a rather difficult practical task for any trader. If you came to the financial market for a stable profit, then you will need an effective assistant – the Keltner Channel indicator. (read more)
The idea of a lucrative impulse as a reversal signal has been exploited by the financial markets for a long time. There are already several generations of traders who have been using the classic Momentum indicator successfully to identify the critical areas and assess the probability of the long-term trends. It will be useful for you too! (read more)
There are several ways to calculate moving averages and each of them has its advantages and disadvantages.
Our main interest, however, is how to profitably use moving averages in trading.
Used extensively in the field of technical analysis, they are a foundational tool with a wide set of applications.
Technical analysts use moving averages to determine trend, to determine levels of support and resistance, to spot price extremes, and for specific trading signals (read more)
In 1975, the brilliant modern mathematician Benoit Mandelbrot proposed the term «Fractals» (lat. fractus – broken, fractured) to describe any structures possessing the properties of scaling, self-similarity and «memory» of the initial conditions.
The use of Fractals geometry in the financial systems was not just for analysis, but also for the forecasting. Today the Fractals indicator is used to find the trend reversal points, local price extremes and strong price levels (about A Trader's Guide to Using Fractals). Let see exactly how this works.
Bill Williams in the well-known «Trade Chaos», first has been suggested to consider market as a chaotic, multiple-factor and self-regulating system, and have cancelled all linear models of the analysis.
However, price Fractals is a more primitive scheme than the one Mandelbrot studied. According to Williams, standard combination of the five bars meets in any scale and it is easy to find them in the chaos (read more)
A trend line is just a single line that tracks a trading range moving in an up or a downtrend.
A trading range could be horizontal, defined as having a fixed-price resistance and support. Or it may move over time, either up or down.
When a trading range is on a rise, the trend line is simply a straight line plotted beneath the price. It follows the movement of the trend and shows rising support.
When a trading range is descending, the trend line is drawn above the price.
Prices usually move in trends and, while the duration of a trend may vary, it can be followed as it evolves in either direction (read more).
The task of measuring the speed of a price appeared simultaneously with the financial market. The trader at any time needs to understand which way the seller/buyer balance is shifting and whether he/she will have time to join this movement.
The practice has shown: the more complex the calculations of a technical tool that tries to assess the speed of a market reaction, the less confidence is caused by its result (read more).
If you have come to the market to play, then you will be able (very seldom!) to win, but with probability of 90% your money will go to a pocket of the more professional and competent players. Let's also ask the famous investor for advice and try to understand − why is this so? (Read more).
All beginners, even those who had theoretical training and already have the minimum experience, suffer a «Woe from Wit» syndrome after the first losses, and the more active their subsequent actions, the worse it affects their deposit.
As a result, there is one step before a nervous breakdown and only several steps before the total loss of the trading account (read more).
As well as in any business, the basis of success in Forex is the consciousness: the trader has to study well himself, and only after that − the market.
The bottom line is this: homo sapiens is always driven by the idea of self-realization: it generates requirements and demands to study new, and the natural competition forces to get into the power play and helps to cross the borders. The profit size is just the intermediate result and an incentive for the further movement (read more).
Attempts to open trading transactions without a clear understanding of the consequences of their actions quickly knock out the bulk of the newcomers from the market.
Why is this so?
The main reason is the incorrect estimation of your place in the market and inefficient planning.
Large players survive in the financial market due to the fact that all their trading objectives (short-term and prospective) are based on special knowledge, technical capabilities, and years of experience, psychological stability and proper management of capital (read more).
Usually the concept of «discipline» presupposes the mandatory implementation of rigidly established rules, norms, laws. The modern financial market − is a multifactorial mathematics, distributed in time, combined with intuition and psychology.
This means that understanding of the requirements of the market and trading strictly by the rules should provide the trader a positive result in each transaction (read more).
We remind you that a large market player employs a whole staff − analysts, financiers, lawyers, risk managers, and only then − the last link − traders. These professionals create trading as a full-fledged business, so you, as an independent participant in the market, have to combine all their qualities (read more).
Emotions in trading have always been one of the main causes of losses, and at the same time − the main driving force for all types of money. Remember the classic idea: buyers push the price up because of greed, and sellers sell because of fear of losses?
It still works perfectly in any market.
Popular training materials on market trading almost do not pay attention to managing emotions. This is understandable: any broker is the first participant in the trading process, which is vitally interested in having you leave your deposit to the market (read more).
Natural evolution created an emotion of fear as a universal protective mechanism in response to an alleged threat. The goal is to ensure the survival of a living being in an aggressive natural environment or in the process of competition.
It is interesting that the so-called limbic system, mechanism of which is considered to be the simplest, answers for the sense of fear in the human brain (read more).
What is intuition psychologists know the best: they believe that this is a special type of thinking involving the subconscious, the mechanism of which is actively explored, but still it is a terra incognita. Nevertheless, as a result of processing information, a person always receives from the subconscious a certain signal to action.
The modern financial market is not in vain considered a polygon for mass manipulation with the human consciousness − the corresponding section of science is called the crowd psychology (read more).
The popular scenario according to which everyone comes in trading only for millions has become outdated long ago. If to exclude the opinion of the chronic losers, then successful investors and traders set very different purposes.
Those, who are hyperactive, but not ready to serious work, «waste» at the market a lot of time and money to prove to themselves (but generally – to people around!), that They! Can! Earn! Too!… $100-200; then, as a rule, abandon the market forever. (read more).
As long as the human factor is involved - nothing is one hundred percent perfect. Since this fact also applies to trading, plans have to be made for the inevitable. And the peaks and valleys of trading involve inevitable losses, as well as account drawdowns.
How well you manage your risk and the fact that not all trades will be winners will determine how you can withstand the valleys long enough to enjoy the peaks.
The Canadian dollar is the main commodity currency of the American region, it is one of the world's top ten assets. Coupled with the US dollar (according to BIS), the CAD holds about 8% of the total turnover of the Forex market, and along with crosses − about 10%.
Historically, it was the English currency that became the basis of the financial market. During the heyday of the British Empire, the pound played a role similar to the current US dollar.
The loss of the political influence of the pound occurred in the 40s of the XX century when the colonies actively withdrew from the control of the British Crown, and the country’s economy was weakened by the Second World War.
Before the invention of the radio, the only communication between the continents was the physical connection by telegraph cable, which was first laid in 1867 across the Atlantic (on the ocean floor). Naturally, stock quotes from Europe to America also came through this communication channel; in memory of this, the British pound is still called the “cable” in the market slang.
Today, the Japanese Yen is considered the third (after USD and EUR) world currency: