Any trader must develop a trading system of his own. I is the principal condition for the regular and stably-profitable work at Forex. Every successful trader whom I know does hold this opinion. That is, such system must clearly and impartially indicate points of the entrance into the market and the exit from it. The lack of a systematic method results in the loss of the trader’s deposit. The work according either to an imperfect trading system or to the traditional one does not save the situation. It can just prolong the distance from opening of the trading account to the inevitable loss and nullifying of this account.
Let us again dwell on T. DeMark viewpoint (he is the analyst, financial consulter and adviser to the biggest market-maker banks at Forex). According to his opinion, there are three different approaches to giving analysis to the charts. The first one is superficial and subjective. Mainly it is based on intuition. To put it briefly, this approach is a common “guessing”. In this case, neither a strict analysis nor grounding is required. This is why the majority of traders restrict themselves to working at this elementary level. For pity, such traders sacrifice logic and consistency to the simplicity and convenience. As regards the second approach, it implies the development of certain market indicators. The latter help detecting the condition of overbought/oversold at the market. Many traders make use of the analysis of this type – at least, partially. However, as a rule, traders use just the most well-known indicators and stick to the generally-accepted means of their interpreting. In other words, the total lack of a creative approach is evident. Such traders do not try either to develop indicators of their own or to improve the ones already available. Besides, dealing with these indicators, such traders relay on them too much. They do not pay attention to their drawbacks.
The third approach is the most effective and valuable. It consists in the development of the systems capable of generating signals for “by” and “sell”. However, not every analyst has reached the necessary degree of education. Many of analysts are rather inexperienced and they do not want to continuously perfect their skill.
After mastering this system to perfection, you will become independent of numerous advisers. You will know the newest achievements in the area of the technical analysis. Thus, you will be capable of being totally responsible for actions and solutions of your own.
Searching for a trading system
I wonder how many trading systems (TS) one can find at Forex sites! As a friend of mine joked, “the number of so-called profitable TS had exceeded the number of successful traders for a long time in advance”.
This situation is perfectly clear to any skillful trader. However, how a beginner (a novice) can resist such a powerful (intensive) flow of advertisings of miraculous TS and wonderful Grails?
However, the process of coming into existence of such TS and their advertising is purely logical and natural. You can compare the information obtainable via Internet with the potentialities inherent in PC technologies that continuously increase. That is, any programmer, incompetent even in the fundamentals of Forex, can take the list of all indicators, available in Internet. Such an individual can create the database of his own, issuing from several hundreds of indicators. He develops a mechanical TS (MTS) on the basis of an arbitrary combination of two or three indicators. After this the “author” claims that due to points of their intersection the program will depict the points of output from the market and input into it. What do we get finally? – Just millions of wonderful “black chests”!
Let us put on trial these “black chests”. Our aim is to trace out how this programmer has managed to earn larger-than-life sums of money at Forex due to his MTS. For this purpose, we use large-scale time charts and volatile currency pairs. With the help of PC, we pick out those MTS which have yielded the positive results more than in 50 (70) % of deals made during several past years. As the evidence, we can submit the account history. In Internet, this service costs $10-20 – for those who do not want to do this work by themselves (or cannot). Now let us compare this account history with the given MTS testing history during several past years.
Can you imagine the number of individuals who would be eager to buy such a MTS from you? In addition, how many naïve investors will want to invest their money into your business? Any way, the risk of your exposure is equal almost to zero.
Now let us scrutinize the situation.
a). For buyers of MTS: It is almost impossible to dispute the fact of testing MTS with the help of the transaction history during several years. Therefore, such a proof, in practice, cannot be contested. And what is more, the author of MTS can “improve” its parameters. He can adjust them to the best results in the course of the transaction history. Such authors do not care how their systems will work in future.
b). For investors: Your dealer can come to an agreement with your investor that the loss would not exceed 25-30% of the investment deposit. Naturally, this item of the agreement will be observed. The author of MTS and the dealer can divide this 25-30% of “the lost money” between themselves. To the investor, they can explain that “the market is unpredictable and we, being decent people, have let you know about this fact in advance”.
And now you do imagine the profits, potentially obtainable due to dozens and hundreds of such MTS. Their parameters can be adjusted to the history of transactions at Forex. Besides, such MTS can be sold by various physical and juridical persons if you work together with an unscrupulous Forex Brokers.
This very idea is expressed by other traders. For instance, D. Cyplakov, the author of digital indicators ( Finware Technologies LTD), states the following. One must keep in mind that such systems are rather precisely adjusted to the bygone situations at the market (curve fitting). At present, it is impossible to prove their reliability at the real market, directed at future.
The reliability of the results obtained with “black chests” makes another problem. A trader who works with a given TS must be really confident in his system technique. This confidence permits maintaining the trade discipline for a long time. Surely, it is difficult to follow the instructions prescribed by a program if its logic is obscure – especially, when the fortune has turned away from you.
At what stage in the trader’s work at Forex the study of the corresponding literature is harmful to the development of one’s own trading system
I can tell a paradox. Reading dozens of thousands of traders’ letters, I can clearly trace out the same tendency. It is well-known to me because of my own experience.
After first failures in working with real accounts, the trader starts with zeal to read books about Forex, one by one. He tries to find out the reasons of his losses. The more this trader reads, the more he becomes perplexed.
Such an individual becomes muddleheaded. I hope that the reasons of this are clear to the readers.
a) There are a lot of various techniques (TS) of work at Forex.
b) The majority of these TS have become out of date – even at the time of the writing. For instance, this has happened to “Trading chaos 2” by B. Williams. Other editions are reliable just partly. Otherwise, the authors just retell truisms concerning divergence, the classical reversal figures and the trend prolongation.
c) There exists neither a general technique nor TS that could logically synthesize a large number of indicators into a single whole.
Thus, a beginner (a novice) at Forex tries to choose data for his TS, systematize and aggregate them. However, thousands of analysts did not succeed in doing this earlier. You can guess what will remain in the mind of a trader-beginner after the reading of dozens of books (especially, as the majority of them are written by traders-losers (the so-called analysts))! Surely, it will be just a mess of bits of information!
After the very first failures, a beginner should do the following:
1). to refuse from the work with real accounts;
2). to give analysis to the reasons of the failures.
Let us suppose that you do relay on your TS and you can trace out the logic of the currency movement up to 1 point – as many traders who graduated from Masterforex Trading Academy can do. The incessant study of quotations given by the Main Computer at Forex indicates that you work not against other traders but against Computer – Organizer of this game at Forex. In this case, you should search for the reasons of your failures in the realm of the trader’s psychology.
Maybe you cannot clearly see the logic of the currency quotations at Forex. In this case, the psychological complications will be postponed till future. At present you must develop profitable TS of your own. It is no use for you to read books one after another. First, you must thoroughly master one of all TS. The aim is to perfectly understand this system and practice it for second nature. One must start with the demo account. Later on it will be possible to proceed to real accounts at Forex. After this, you will see any literature from completely another viewpoint. New information will be ranged seriatim – instead of the previous “muddleheaded” state of mind.
Fundamentals of developing a profitable Masterforex -V TS.
First of all, let us develop the concepts, to which TS must correspond from the viewpoint of a working trader. This system must meet the following demands:
· It must be perfectly logical and clear to a trader. It must contain various simple elements. Points of their intersections must indicate the points of input into the market and output from it.
· The system must be equally efficient in any time intervals – to start from minutes and up to weekly charts. The difference consists in gained profits and the duration of opened positions at Forex.
· The system must be applicable to any of currency pairs, the quotations of which are given at Forex.
· To a trader, the system must indicate correlation between the tactic and strategy. Generally speaking, the strategy in a shorter chart corresponds to the tactic in a longer one. For instance, by the strategy in the chart M1 one can trace out the tactic in M5. Analogously, the strategy in M5 (10) depicts the tactic in M15 (30) – and so on up to weekly and monthly charts.
Developing one’s own TS for the successful trade at Forex.
1. You should not “invent a bicycle” anew. As the basis, you take a TS developed by an expert at Forex. You must study this system up to perfection. You must clearly distinct the weak points of this system from the strong ones. Briefly to say, you must reach the level of the automatic opening and closing deals according to this system.
2. Criteria of the trader’s skill at Forex : there are at least 3 degrees (levels) of knowledge.
· A trader needs accessible means for demonstrating his viewpoint at the situations at the market. These means are books, sites, etc. There he can present his logic of the analysis of the market and a part of his techniques (TS elements). Any individual can study and use them.
· A paid educational system is necessary as well. It makes the logical development of the first degree (level) of the skill and knowledge. In practice, every experienced and well-known in Internet trader is the author of a paid system of studying Forex (e.g., A. Elder, B. Williams, L. Williams, etc.).
· There is the third degree (level) of skill and knowledge. Naturally, any author never completely reveals his secrets and tricks (the reasons are evident). The criterion of achieving this level is the trader’s ability to explain any change in the movement of any currency pair from the viewpoint of the trader’s own TS.
3. After mastering TS developed by any of Masters, you must “feel” it as your own.
· Your work with demo accounts must be perfected to automatism. You must also work through all variants of input into the trading and output from it. For this, it is necessary to “exploit” your TS up to the limit. That is, during one trading session you must arrange dozens of deals – with different currency pairs simultaneously.
· After mastering the work according to a given technique up to perfection, a trader can clearly detect the following:
– The out-of-the market flat;
– The intra-session trend; its evolution in immediate several hours and the currency corresponding positions;
– The intra-session flat correction;
– A new wave over the trend; possible variants of the currency pair movement;
– The trade reversal.
· Accommodation of your TS to your personality. That is, someone is satisfied to regularly gain 20-30 points per a day working with one currency pair. This person does not arrange long-term deals. On the contrary, someone prefers to work with a weekly trend, etc.
· Self-perfection and analyzing of your work according to your TS every day after the end of trading.
– You must see how many items of profit you have earned.
– You must understand when you have opened the deal correctly, where you were late, and when you were afraid of adding a deal in the intra-session trend, etc (the analysis of your work on closing the deals is analogous).
– You must estimate your work during the given intra-day trading session by yourself. That is, if you have gained 50%-profit during the trading session, your mark is ” 5″. If the gained profit makes 40%, the mark is ” 4″ and so on.
Dwelling on elements of Masterforex Trading System
I have discovered the following:
· More than two dozens of new elements of the analysis are found out. They can help us to predict the tendency in currency pair movement at Forex. This discovery is principally new. It has no analogies in the literature concerning TS at Masterforex -V.
· A different approach to the essence of the moving average combination. That is, not figures themselves are important but the principles of their movement.
· New Fibonacci levels and technique of their application.
· The “stock reserve” of the currency pair movement in the trading session.
· The difference between true and false breaking through the levels of support and resistance.
· The new classification of trends. The intra-session and weekly trends are the most important for the trader’s work
· Criteria of the beginning of intra-session and weekly trends.
· The principles of a false attack (lunge) of the trend and its intensity (potential).
· Trends and flats in the currency pair movement; the trader’s tactic in each of these cases.
· Criteria of the trend end and beginning of the correction.
· Criteria of the trend reversal and replacement.
· Specificities in the currency pair movement in the cases of the coincidence of intra-session and weekly trends and discrepancy between them.
· Specificities in the movement of EURO/USD and GBP/USD pairs in the cases of coincidence of their group movement and discrepancy between them.
· Currencies-allies as indicators for work with 2 or 3 currency pairs (I work with GBP/USD, EURO/USD and, additionally, with USD/SWISSI).
· Specificities in the work with currency pairs after the issue of news.
· The correlation between the edited news statistics and the trend characteristic.
· The development of a simple and reliable indicator of the “noise” (rumors) at the market. This index helps us to explain the movement of any currency pair up to 1 point.
· The methods of replacement of “stop-losses” with the lock and techniques of termination of each deal.
· The method of study (scanning) of TS developed by other traders.
· The principally new methods in solving the traders’ psychological problems (the fear, diffidence, etc.).
· Compatibility of elements of my TS with any other TS (3 shields developed by Elder, sloping (slanted) channels elaborated by DeMarque, Fibonacci standard levels, etc.). As the result, each element of any of world-known TS gives prompts to a trader and supplements TS in the real trading.
· The system of educating and training of traders, based on the principally different theoretical fundamentals. It includes the free-of-charge basic course in School of Trading for beginners (see http://forum.masterforex-v.su/). Besides, one can practice in Masterforex-V Trading Academy. A student also gets the opportunity to communicate with traders from more than 40 countries. An individual can learn the more experienced traders’ opinion and receive answers concerning daily trading. In addition, the communication via Internet at the closed forum (http://forum.masterforex-v.su/) is much more convenient. It positively contrasts with various other seminars and training systems. The latter require maximal costs and yield minimal opportunities of acquiring the knowledge and skill, necessary for a trader.
If you wish to be trained on Trading System Masterforex-V – one of new and most effective techniques of trade on Forex in the world visit http://www.masterforex-v.su/