TA research
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.
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.