Mysteries of the currency trading system

Mysteries of the currency trading system development - Part 1

Many merchants fantasize about technical trading system or indicator that can capture every zig zag and market. A lot of thought actions, but sorry to be bearer of bad news, it does not. Please do not shoot the Messenger!

Despite all the marketing hype all over the Internet, no one system or indicator can do it all.

Have you ever tried to tune-up your car? So if you do, you do not use just one tool. Depending on the car, took a whole bunch of specialized tools to get the job. Not only that, you also need to know how to use these tools and when to use them.

Trying to pull profits of any market on a regular basis is the same way. It requires very specialized tools as well as for most traders, technical analysis provides our range of tools.

The market can zig zag and anytime we need a "trade tools" full technical analysis tools.

For example, when the market is trading in range, then oscillating indicators work very well.

However, when the market is trending strongly then the oscillators are not worth a pile of beans. When the market is trending then things like moving averages are one of the "tools of choice."

Getting back to the car analogy ... When your car is not working properly, your mechanic that pops up a diagnostic machine that quickly tells you what the problem is. Then it is simply a matter of getting the right tools and parts for the situation.

When it comes to trading, the bottom-line is if you can not diagnose the current market, then chances are you will be ill prepared to lose money.

In this post I am going to share a strategy that will help you get a much better reading (diagnosis) on the market. This in turn will ensure that you use a proper trading system and technical analysis tools to get the job.

System Development technique 1

Need to find a market or time frame that best suits your trading system.

Let's use my trade secret program as a real example. In this program I like to look at a candlestick chart, Stochastics indicator and a series of chart formations. This creates a unique system that helps me to capitalize on many trades in all markets, including forex, futures and stocks.

While you can find countless trades with this program, it does not mean it will work equally well all the time in all situations. Let me explain ...

Let's say I want to day trade stocks. I can look at the 15 minute chart of Microsoft information and there are many situations where my system is set. By simply switching to speak at 5, 10 or 30 minutes you can find some great setup. However, if Microsoft for any reason does not seem to produce the amount of trades originating on my system, then simply look at other actions to improve opportunities.

Let's look at an example in forex trading. They say they have developed a strategy that looks promising. You need to go through many currency pairs to see which ones contain mostly setting as dictated by your trading methodology.

Let's look at an example. Say that a position trader and used daily charts. If you do not find many trade setup, then you can suddenly find a whole supply of them by watching the 2 day or weekly pattern. You may even want to jump down to a 4hour chart to get a different perspective.

Once you have found some good candidates to continue to ...

System Development Technique 2

There is ample amount of valid settings for your trading system is only half the equation.

You need to trade markets that follow through! In other words, once you input your cause, they begin to move with a lot of momentum in the right direction. I can not stress this enough, the point is that it puts money in your account. Without it will eke small profit and whipsawed in choppy market conditions.

Trades that have a lot of momentum will show price bars are mostly made higher highs and higher lows up trend. The down trend will have the most lower highs and lower lows.

In a strong uptrend, bars, will also tend to close in the upper third of their range. The strong downward trend they will mainly be closed in the lower third of the range bars.

When looking at my candlestick charts I also want to see a predominance of green candles in an up trend and a number of red candlesticks in a down trend.

So to pull it all together ...

Step 1: First find a suitable time period in which there is sufficient trading setup based on your strategy

Step 2: Make sure when your trade is activated you see signs of a strong impulse to follow through

If you do not see signs of a strong impulse, then chances are the market will be choppy and you want to avoid these like the plague as they are much harder to make money in. Choppy markets can also cause you to stop by way more.

By doing the above steps will be completed with a small group of "cream of the crop" shares articles, resources and more. This way you will spend all your energy fully focused on markets that will give you the greatest chance of success.

One last thing to note ... Markets change, so you must constantly evaluate whether your favorite stock, currency, commodity still apply the same way. If not, then you should look for a better time frame or move to a new market.