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Thread: TA research

  1. Default 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.

  2. Default

    If it's any help Keynes is reputed to have stayed in bed reading the newspapers until the opening of the London market

    He would then telephone his broker/s and open or change his currency positions

    All before working each day on revolutionising economic theory

    Wishing you similar success

  3. Default

    Considering you are a postgraduate student, I assume you have already done significant research into the business/art of trading (be it FX, equities, commodities, etc.).

    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.

  4. Default

    Student: I'm afraid this is probably not very helpful, but there are thousands of approaches that will potentially deliver profit, and millions that won't.

    There are successful (and unsuccessful) traders who operate across every conceivable time frame: buy-and-hold investors, longer term traders, position traders, swing traders, intraday traders. Different strokes for different folks, all with different personalities, financial goals and lifestyle objectives.

    To answer your other question: some traders trade several markets; some only one.

    Significant common habits and principles of successful traders are: they trade in disciplined fashion, to a proven plan; they manage risk, by choosing only low-risk entries, exiting losers quickly, sizing positions modestly, and letting winners run by riding trends as long as possible. This is the only demonstrable way of overcoming the almost random nature of price behavior.

    There are many excellent posts in the 'Trading � Systems' topic. All I can suggest is that you start reading there.

  5. Default

    However, I still have the big problem of not knowing which rules are most common and therefore which ones to study. For my thesis the argument is that if any of these rules work - based purely on their buy or sell signals, and the profits derived from this - then the currency markets are not 'efficient'. In this sense, psychology, discipline or behaviour should not be allowed influence the decision of the trader, because if the rule says to sell, then he/she must sell. This may not follow on from reality, but it is the closest approximation possible that can be econometrically studied!! For example, other research papers have found that from a strict application of the Moving Average rule or the Head-and-Shoulders rule, over the long-term significant profits can be made. It is in this line that I wish to update the research by analysing more modern rules.

    With all this in mind, any advice as to the common, widely used (and maybe successful!!) trading rules would be very welcome.

    Thanks again for your help,

  6. Default

    Your comment: "In this sense, psychology, discipline or behaviour should not be allowed influence the decision of the trader, because if the rule says to sell, then he/she must sell."

    My understanding of what is generally meant by "discipline" is to have the courage to enter a trade because the rule says to buy, and the patience to wait when the rule says not to buy, rather than buy recklessly according to the likes of hunches, speculation, broker advice or market buzz. Discipline means strict adherence to one's plan, including system rules.

 

 

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