Developing my own trading strategy – Part 1

When I just started trading the Forex Market I made the mistake of thinking that an indicator, like RSI, Stochastic or MACD, is equal to having a trading system. I poured over charts in the beginning seeing how “easy” it was to spot market turns with these indicators. Buying or selling when the indicator was at certain levels looked so easy when looking at the historical chart. Hindsight is a perfect science, and the problem is that trading is done forward and not backwards. The market can not be predicted with any degree of accuracy. There is a lot of uncertainty in trading the trading the forex market successfully.
As I stated in a previous post, you must really know yourself and how you will function under stress in terms of greed and fear (see below - 7 May 2007) to be able to master your emotions while trading. It took me quite some time just to realize that I am not very effective in controlling my own emotional experiences while trading. Your personality can be both an asset and a liability when trading the forex market. For this reason I am shying away from discretionary systems (where your discretion dictates your trading) to searching for a more mechanical method. Mechanical systems have proven to be more agreeable to my personality than discretionary methods. The system dictates when and how I will trade and it leaves my emotional experience on the sideline. But this differs from person to person.
To trade successfully you need a system that is in accord with who you are and what you wish to get out of your trading. In this respect I believe that developing a trading system needs to take some time en experimenting. In the next post I will begin to tell you how I started to create my own mechanical trading system.
Till next time – May you trade the Forex Market successfully