Translated from Russian by Google Translate
1 Сентябрь 2009

Create your own trading strategy. Part 1 (Introduction)

It so happens that the first steps on the currency market forex, I began to sympathize with the analysis of the market with technical analysis. I walked down the path of least resistance. Technical analysis does not require knowledge of micro and macroeconomics, as it should when using fundamental analysis. All necessary data at your fingertips. When used in its strategy of fundamental analysis, we are always in a precarious situation, because the tactics of Forex is based on timely analysis of the market and take quick and informed decisions. But it often happens that the market has already been set in motion, reacting to some news, but we have on screen is not seen nothing yet.


It is for this reason, and because of the need to explore more of the material, many traders have become adherents of technical analysis, and their tactic of Forex is based precisely on this basis. Today there is a large amount of literature on technical analysis, but in order to reach some heights in trading, you need to develop their vision of the market, to form their views. A kind of philosophy of the currency market. Therefore, in this article my focus on the most pressing issues related to analysis and forecasting of the market, but also focus, as should be based forex trading tactics.

First, try to figure out what is the basis of successful forex trading forex.

These include four components: the time interval of trade, forming their own opinion, the study of methodological foundations of trade and the use of data based on an analysis of support and resistance levels.

1. Forming your own opinion about the functioning of the currency market.

You can have different assess the foreign exchange market and tactics forex, which you apply, will bring you a regular income. But for this one of the important moments in the trade will be your personal approach to the formation of ideology. Suppose you analyze the chart for any currency pair. You can see that the trend in this case, downward and continue to analyze the situation, then make sure that the weekly, daily, and four-hour charts show a downtrend. You open position in the direction of this trend, ie short position. And finally get damages.

In this case, you will be very upset, because you have seen that at all time intervals was the same picture. Hence, reasonably assumed that the price will continue its descent. But in this situation, do not rush to blame the market. Just goes to an impartial decision on opening a position, you should have been a more thorough analysis using additional tools. That such trivialities and emerging market philosophy, which subsequently builds and tactics of Forex.

2. Methodological foundations trade

I believe that every trader, whose tactics Forex - is not just a set of rules, but something like the Holy Grail, should be guided in their actions following points:
2.1 Money Management - is the management of their risk
2.2 The psychological aspect - the ability not to succumb to the crowd
2.3 Tactics Forex - a premeditated strategy of entry and exit from the market
2.4 The analytical capabilities - the ability to competently transfer events that occur on their map of strategic planning

3. Time interval Trade

In this case, forex tactics should be based on the ability to calculate all the possible errors in you use the strategy. For example, it is believed that the forex market there is noise, which is about 10 pips. What is noise? Short-lived «sag» prices may occur as a result of a major operation. For example, a major investor made a deal for a large amount. Price dropped by 5 pips, but after a short time, again returned to its original position. Theoretically, this is so, but in reality - this is not a scientific fact. To all other, each indicative has a definite difference in pips.

Thus, using these data can be short-term analysis, which resulted in forex tactic will be more perfect. So we come to the conclusion that:

3.1 If an analysis of 5-minute charts for a certain period of time we will observe «sag» price by 15 pips. Given the above probability of noise, we conclude that, of those 15 pips only 5 would be really predictable. Hence we can conclude that in this case, the percentage of noise-real movement is 66%

3.2 If an analysis of time schedules and analyze the price movement of 100 pips, in this case the market noise is 10%

3.3 If an analysis of daily schedules and catch the movement in, say, 500 pips, then the market noise in this case is 2%.

Of course, this is not scientifically developed method, but only a sample, from which you must build. The main idea in this case, I would like to convey to you - is that, as you can see, in long intervals of time the noise is much less. It turns out that when we sell at short time intervals, we are trying to predict the noise, and when on long - the market. It turns out that on its own analysis and development of trading strategy at short intervals of time is irrelevant, and the market in this case is unpredictable.

4. Another important factor that must be taken into account - this is support and resistance levels.

Standard tactics Forex requires open long position when the price is repelled from the line of support and open a short position when the price is repelled from the line of resistance. Support and resistance levels - is an elementary set of rules, which must contain each tactic forex, as efficiency of the mechanism of market analysis proved by time. This is something that exists in the nature of the market. Most traders around the world witnessed a similar school of currency dealing, so your task is to be able to properly cost and analyze these elements.

Read the second part of the Forex-strategies (Create your own trading strategy. Part 2)