After weeks of analysis I just can’t grasp forex charts.
Let me qualify that statement - I understand what they show and how to read them, it’s just when I analyse them: they appear to be random, yet appling a strategy which should break even for random patterns fails.
Some details:
I back tested 44K candles in excel against the common indicators e.g. Rsi, bollinger bands etc and they all converged on 50:50 success fail ratio, suggesting that the charts are overall random on a macro scale. Yet if test a strategy which includes no spread and should converge to 0 I end up negative, suggesting that there is a pattern.
Back testing the indicators either individually or together all converge on 0 - therfore suggesting that they don’t really indictate anything. Even applying rudimentary trend analysis (limited to what I can mathematically model in excel) with indicators still, with enough data, converges on zero.
I just can’t seem to establish a strategy that isn’t down to luck
Thorough research work, but you’re not necessarily starting at the right point. The point is to find an edge that allows you to make a profit. That edge can be small and can be temporary. What you have proven is not that there is no edge but that it is indeed small and it is indeed temporary.
For example, winter temperatures are lower, summer temperatures are higher. Yet if you look at the average annual temperatures they will be constant year after year after year. But what we’re looking for is a temporary period each year during which temperature changes in a predictable direction. So each year there is a slight daily temperature change from cold in winter to warm in summer and back again. In trading, this is where the profit comes from.
Don’t give up trading, you have not proven it cannot work.
Regarding how I modelled the indicators - it was very rudimentary, but the calculations to obtain BB, RSI, Ema, etc etc are all online. I used minute candle, 5 min candle, 1 hour candle and 1 day candle data, applying conditional functions based on what I wanted to do with the indicator.
It was all very simplistic but illustrated that simple indicators all resolve towards 50:50 odds.
A simple example, if a candle opens above a 2 deviation BB upper line the probability that the next candle will be a bear (as many tutorials would lead you to believe) is 50%.
Apply RSIto the above, as an additional layer, and still only 50% chance.
Im not breaking new ground but facing cold, hard data, tales away the human, emotive side that likes to see patterns that don’t actually exist.
I feel your frustration, I’ve been there and I help many that get “stuck” in this same box. Your results are typical of methodical trading without a “catalyst.” Your strategy needs that catalyst, for example, mine is “Smart-Money” big volume players that are actually the ones that move prices. So that has been my focus for the last 11 years.
Most retail traders think T/A is a catalyst and it is not, that is why most pro traders are 80% fundamental and only 20% T/A.
