One pair

[edacsac]

I've read several times in different threads how it is important to pick one currency pair and stick with it. How do you pick your pair? My main trading will be between 6 or 7pm to 12 or 1 am in the EST evenings. I might have 20 minutes to spare before work between 7-9 am EST, and maybe a few minutes at lunch. But the main time will be EST evenings/night. My availability puts me all over the board as far as market times are concerned.

With no real reasoning behind it, I have a few pairs that have become favorite: AUD/NZD, NZD/USD, USD/JPY, AUD/JPY, CHF/JPY, USD/CHF.

What criteria do you use to pick that one pair?

[LadyPip]

One of the things that I did to pick my first pair was to focus on the majors. There is all sorts of analysis out there but the majority of them focus on GPB/USD, EUR/USD, USD/CHF, and USD/JPY. After narrowing it down to these four I looked at the time frame that I would be trading and figured which ones seemed to have the most movement during the time period that I would be trading.

Also, since I have a trading system that was working for most pairs that I really liked I back tested to see which pair it worked best with and kept my focus on that pair until I was ready to add more pairs.

One thing that I would avoid starting out is any pair with big spreads and big movements that you might not be prepared for. For example, when I first started trading one of the pairs that I had gotten involved in was the GBP/JPY. At the time the spread was around 10 pips and in about a days time the pair tended to move a few 100 pips. This looks great but if you aren't ready to handle it all you will be doing is losing money.

[pipish]

Hey guys, good info, lady if you dont mind me asking. I hear a lot about backtesting, yet I have no idea what it is. I am guessing that its just looking back through the charts to see where your signals would have paid off or not.

is that right?

[LadyPip]

For the most part that is what it is. The important thing to remember is to be honest with yourself. Sometimes when back testing a system I will look at the indicators seeing that they have given a signal to go short but I will have taken a peak and seen that in fact the trend continued long or vice versa. At these times it is vital that you be truthful with yourself and not try to find things to justify why you wouldn't have gotten into that trade. If your indicators got you into the trade you are in the trade. The easiest way to not do this is to make sure that you are only going forward one candle at a time so that you can't see what the future of the chart holds.

If you know any programming you can use meta trader or Dealbook to code in the parameters of your trade and use that to back test. This takes away the guesswork and goes faster.

Also too, take into consideration that back testing won't guarantee what the results of your system will be. It just shows the results of what your system would have gotten in the past. This basically helps you to understand your system more (faults and all) so that you are aware of it while trading and to give you an idea of what your system is capable of.

[edacsac]

You've peaked my interest with code thing, LadyPip! I'm probably not ready for back testing anything yet as I'm still learning the nature of various indicators, but programming experience I do have!

This past week I've slacked on forex demo trading altogether, just to take a breather. Now I'd like to write some code for back testing!

I wonder if the scripting IDE or whatever it is robust enough that I can recognize something like an engulfing pattern on the upper BB line, find the close of the next candlestick and compare it's close to the final candlestick of the engulfing pattern, check the status of any other indicators and create an entry point if all is in alignment (or something similar)?

[LadyPip]

I find that if you have coding experience meta trader is pretty good. You can download it from their website. If you are looking at doing something with candlestick patterns below is a link to an indicator for meta trader that looks for candlestick patterns.

http://www.forex-tsd.com/23438-post6.html Forex Trading - View Single Post - Candlestick pattern recognition

[Yarcofin]

I typically pick 6 pairs at a time, and just go with whatever trend looks strongest on the indicators, so I guess you don't want my advice.

[edacsac]

Originally Posted by Yarcofin

, so I guess you don't want my advice.

Ahh, but I do! I've also haven't figured out the logic in only working one pair. I know it would be a mistake to have a bunch of open trades on different pairs going at once for a newbie. But otherwise, I haven't figured out why to stick with one. Plus, (from reading a bit on your blog) you do things by the week it seems. I suppose that would add a twist to things.

[IDR]

Originally Posted by edacsac

I haven't figured out why to stick with one.

Imagine yourself learning to throw dart. If you started with only one target, wouldn't it take shorter time to master it than starting with, say, five targets at once? Even if you didn't try to hit all five at once. Of course, this isn't absolute...some people could do with five targets as a starting point. But, the question is, which one are you? If you just an "average joe" like me, starting with one certainly more easier than five.

On the other hand, forex pairs are much like spouses. Each has its own characteristics, its own way. And you would like to know it as much as you could. Again, it's easier to try and understand a would-be spouse rather than five would-be spouses, don't you think?

Nevertheless, some people start with one pair then expand to several. Others start with several pair then focus on one. Still other start with one and stick with it. And yet another start with several and stay with several. In the end, it's all depends on yourself. Your own choice.

[edacsac]

Thanks IDR,

Right now I don't see anything predictable as how a pair acts. I can scroll back as far as I can on a pair in the largest increment chart and not see a thing. So I'm hoping at some point in the future I will understand the characteristics of currency pairs. At the moment, I rarely look back a dozen candlesticks when I decide to do something, although I am changing that, but a dozen candlesticks won't tell me anything but immediate price action.

There is a lot to learn.