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     student
Member
Username: student
Post Number: 1
Registered: 06-2005Rating: N/A
Votes: 0
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| | Thursday, June 30, 2005 - 01:23 am: |  
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Hi all,
I am a Master's student in Ireland studying the profitability of TA in the foreign currency markets for my thesis. I would be most grateful if I could ask your advise and pick your brains on a few issues that I am encountering. I apologise in advance for my ignorance in this area!
Perhaps the biggest problem facing me is which trading rules to study. At the moment I am considering using the RSI rule, and the Filter rule....but if there are different trading rules that are more relevant and used more frequently then please let me know.
Also, regarding trading time, would it be more common to have trades from an account continuously (moving to different markets as they open), or would trading only take place during the trading hours in one country?
Finally, how often (on average) would trades be conducted (every few minutes, one an hour etc.).
I realise this is alot to ask, but any help would be greatly appreciated.
Best regards.
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hilarius
Member
Username: hilarius
Post Number: 817
Registered: 04-2004Rating: N/A
Votes: 0
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| | Thursday, June 30, 2005 - 08:22 am: |
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Student
If it's any help Keynes is reputed to have stayed in bed reading the newspapers until the opening of the London market
He would then telephone his broker/s and open or change his currency positions
All before working each day on revolutionising economic theory
Wishing you similar success 
Hilarius
I come in peace to share my thoughts and to shine my candle light on possible long term opportunities
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deanrosario
Member
Username: deanrosario
Post Number: 635
Registered: 11-2002Rating: N/A
Votes: 0
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| | Thursday, June 30, 2005 - 10:26 am: |
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Hi Student
Considering you are a postgraduate student, I assume you have already done significant research into the business/art of trading (be it FX, equities, commodities, etc.).
You should have, therefore, a good theoretical understanding of trading and how the markets operate.
If this is the case, then I think you are looking at the wrong rules to study - i.e. there is no "holy grail" indicator or combination of indicators best suited to any market.
All indicators are based on the 5 basic inputs that are available at any given time during the trading day - i.e. the open price, the high price, the low price, the closing price and the volume.
Indicators merely manipulate these 5 parameters to, maybe, give you and edge. For me, the OHLC bars and one SMA is sufficient for my trading style; but, this is NOT the only way to trade.
Controlling your mind and having discipline are the most important aspects of trading. RSIs, SMAs, stochastics, etc. are all irrelevant if you can't control your behaviour each trading day.
So, my golden rules for trading do not mention any indicators at all. Just a very boring set of rules ...
1. Have a trading plan
2. Stick to the trading plan ALWAYS
The trading plan itself will contain rules about
- when to enter
- when not to enter
- when to exit with a profit
- when to exit with a loss
- etc.
The various indicators can be used to create the trading plan but, as I said, there is no holy grail of indicators
In relation to "trading time" that will vary depending on your personality and the market you are trading.
Regards
Dean
"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." George Soros
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david_louisson
Member
Username: david_louisson
Post Number: 82
Registered: 02-2004Rating: N/A
Votes: 0
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| | Thursday, June 30, 2005 - 08:04 pm: |
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Dean: very well said, IMHO.
Student: I'm afraid this is probably not very helpful, but there are thousands of approaches that will potentially deliver profit, and millions that won't.
There are successful (and unsuccessful) traders who operate across every conceivable time frame: buy-and-hold investors, longer term traders, position traders, swing traders, intraday traders. Different strokes for different folks, all with different personalities, financial goals and lifestyle objectives.
To answer your other question: some traders trade several markets; some only one.
Significant common habits and principles of successful traders are: they trade in disciplined fashion, to a proven plan; they manage risk, by choosing only low-risk entries, exiting losers quickly, sizing positions modestly, and letting winners run by riding trends as long as possible. This is the only demonstrable way of overcoming the almost random nature of price behavior.
There are many excellent posts in the 'Trading – Systems' topic. All I can suggest is that you start reading there.
Good luck!
David
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student
Member
Username: student
Post Number: 2
Registered: 06-2005Rating: N/A
Votes: 0
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| | Friday, July 01, 2005 - 04:29 am: |
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Hi All,
Thanks so much for all the help so far. Your comments are greatly appreciated.
However, I still have the big problem of not knowing which rules are most common and therefore which ones to study. For my thesis the argument is that if any of these rules work - based purely on their buy or sell signals, and the profits derived from this - then the currency markets are not 'efficient'. In this sense, psychology, discipline or behaviour should not be allowed influence the decision of the trader, because if the rule says to sell, then he/she must sell. This may not follow on from reality, but it is the closest approximation possible that can be econometrically studied!! For example, other research papers have found that from a strict application of the Moving Average rule or the Head-and-Shoulders rule, over the long-term significant profits can be made. It is in this line that I wish to update the research by analysing more modern rules.
With all this in mind, any advice as to the common, widely used (and maybe successful!!) trading rules would be very welcome.
Thanks again for your help,
Student.
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david_louisson
Member
Username: david_louisson
Post Number: 83
Registered: 02-2004Rating: N/A
Votes: 0
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| | Friday, July 01, 2005 - 07:10 am: |
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Hi Student
Your comment: "In this sense, psychology, discipline or behaviour should not be allowed influence the decision of the trader, because if the rule says to sell, then he/she must sell."
My understanding of what is generally meant by "discipline" is to have the courage to enter a trade because the rule says to buy, and the patience to wait when the rule says not to buy, rather than buy recklessly according to the likes of hunches, speculation, broker advice or market buzz. Discipline means strict adherence to one's plan, including system rules.
Re the efficiency of markets, here are two links that might be useful:
http://www.investorhome.com/anomtec.htm
http://www.investorhome.com/emh.htm
Many of the contributors here offer insight into their own trading systems. These apply to stocks, but I guess similar logic could be used to trade FX.
Snifter gives his version here: http://forum.incrediblecharts.com/messages/12/333776.html
See his posts (starting with 'Post number: 614' in the left margin), to get an idea of the indicators he uses, and how he uses them.
This adheres to a basic "trend following" formula, that picks low-risk entries, something like this:
1. The longer term trend for the stock is upward.
2. The price has retreated to a short term extreme, within the context of this upward trend.
3. There is now evidence of a reversal from this extreme.
4. The sector of the stock you are trading, and preferably the overall market, are simultaneously starting to trend upward.
5. With reference to point 1, the probability is improved if the longer term trend is still in relative infancy, i.e. the longer any trend persists, the more imminent its eventual reversal.
6. The return/risk equation is favorable.
Of course, exactly the reverse applies if you are looking to trade a SHORT position.
You can use pretty much any indicators you want to time your entries. Many traders use something as simple as close crossing a MA, or a turn in the MA. The bottom line is that you enter on a price bar, and any indicator can be calibrated to give an earlier or later entry. Earlier tends to be more risky: gives higher profit, but less often; later the reverse. You can read more about my thoughts on entries and exits in my posts in this thread: http://forum.incrediblecharts.com/messages/12/477782.html
Here you will find another post of mine discussing entry (see "Post Number: 66" in left margin): http://forum.incrediblecharts.com/messages/191443/493874.html
I include this as an illustration of a possible approach that does not use indicators at all.
Another thread that give insight into trading systems: http://forum.incrediblecharts.com/messages/11/295533.html
There are plenty more: just shop around in the "Trading – Systems" area of the forum.
Here is a link to some interesting articles: http://www.rb-trading.com/index.html
This link is just one of a vast library of links that I have, to all kinds of free Internet-based material on technical analysis and trading. I can't post them all here, because to do so would violate the posting rules. However, if you want to send me an e-mail (david_louisson@hotmail.com), I will direct you to them.
Hope this is helpful
David
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