How To Create Your Very Own Forex Trading System – Part 1

Filed under: Learn Forex Trading |

Screen shot 2013-08-06 at 10.52.12This is a two-part article that will explain, step by step, exactly how to create your very own forex trading system. This is only a template, the scaffolding, as it were, to create a workable and profitable system – but ultimately, it is up to you to provide the creativity with regard to ideas. So without further ado – let’s proceed to stage 1.


Stage 1: The Hypothesis


It is important to first come up with a hypothesis that is logical and makes sense. For example, you might hypothesise that trading pin bars in trending markets is profitable. A pin bar marks a rejection in the market, and if a market is trending, then the pin bar shows that the market is still very strong – so this is a logical hypothesis to make. Once you have your hypothesis, you have to then start to test it via observations.


Stage 2: The Visual Inspection


To begin with, your hypothesis can be tested via a visual inspection of historical data via MT4. If, after a substantial visual inspection, you still feel that the hypothesis might be valid, then it is time for a more in-depth and rigorous test of that hypothesis. However, if not, then it is back to the drawing board (see Stage 1).


Stage 3: Backtesting


a) There are several valid ways in which you can test your hypothesis. One way is to trawl through back data on MT4, and write down each trade and the result as you go. However, this can be a laborious process, and requires a lot of calculations to make it a valid test. It would involve making exact calculations regarding lots and trade levels, and this can eat up a lot of time.


[To be Continued…]

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