Trading is a very emotional experience for most people including experienced trader like myself. So I want my trading to be as systematic as possible because traders tend to make mistake in their trading by their own emotions. When market goes in favour of their view, they tend to take profit too early. And when market goes against their view, they tend to hold on to their losing positions.?
So to setup?my own trading system, first?I do a back-testing on which indicator is best for a particular currency pairs. Back-testing period used is 2 years. Anything more than 2 years may be irrelevant for my short-term trading, and anything less than 2 years may not?capture all the important senarios?for?my back-testing.
I had used 8 indicators for the back-testing, and here are the expected trading profit if you had used those indicator to trade for the past 2 years:
Bollingerband: $42054
Comm Channel: -$1389
Dir Dvmnt Index: -$1130
MACD: -$1137
Relative Strenth Index: -$3158
Stochastic: $7328
Williams %: -$5654
Parabolic System: $6105
Bollingerband had achieved the largest amount of profit in this back-testing,?so I'll be using this?indicator to trade.?Since I had found a proven indicator to track buy and sell signals for AUD/USD, trading?AUD/USD would just be a systematic process for me.
First my proven indicator must signal buy or sell on the daily chart.
Second I use 10 min chart to look for entry level.
Third find a level for the stop and target level.?
On 10 June 08,?my proven indicator had signal sell in the daily chart. So I know I must sell and not buy.
Next I look for entry point using the 10 min chart. 10 min chart shows that AUD/USD is unable to move above the resistance level,?so I?placed?my entry point to short is at o.9493. See here: http://binarytrading.blogspot.com/2008/06/shorted-100000-audusd-at-09493.html
After that, I?look for?stop level and target level to place. I set my stop level above the resistance which is at 0.9533. As for target level, I had set at 0.9450.
Then I wait and monitor the 5 min chart. I?will not?attempt to get out of my position even though AUD/USD seems to be moving against my view because I trust my proven indicator. Before I know it, my trade had already?taken profit at 0.9450. See here: http://binarytrading.blogspot.com/2008/06/shorted-100000-audusd-at-09493-closed.html
Easy? Of course not, easy said then done. Trading is just like any other job, practice makes perfect, and the best way to practice is to open a mini account to take mini forex. George Soros starts forex trading at the age of 16, and today he is a trading guru.
For more of my forex trading ideas, go to: http://binarytrading.blogspot.com/
