There has been a rise in trading Forex online the last couple of years. The traders have access to a lot of trading tools like the Bollinger Bands, the Stochastic Oscillator, Parabolic SAR, Linear regression, Williams %R etc.
But which provides the best results? Which gain most profit? Do the tools gain different profits in different market situations? Etc.
My focus in this article is to describe how to test these tools as a Forex trading strategy and how the test results can be written in a table.
A test is several trades with the same indicator. A test could be 20 trades with two indicators as it is unusually just to use one indicator. A test could also be 20 trades with three indicators.
The advantage testing and note the test results in a table are that it provides an overview of which of the indicators that fit the trader and which one gain the most profit. The goal of the test is to improve skills and profit margin.
An example of a test could be 20 trades with the Bollinger bands as the primary indicator and the Stochastic Oscillator as the secondary indicator. If a third indicator is needed it could be the Alligator as a secondary indicator.
Each time a trade is made the trader makes notes in a table. The table consists of five columns with the following headlines
In the example the notes in the table could look like this.
22 of august 2012
The Bollinger bands
The Stochastic Oscillator
The trade was stopped as the price line is outside the upper standard deviation and the candle stick was red.
The tests tell the trader how he has done in the past and with which trading tools. In the column Notes he could have noted how he felt during the trade. An example could be if he felt stressed or relax. If the 20 trades showed that he was relaxed it could look like he had found a trading tool that fits him.
As mentioned the goal of the test is to improve the skills and profit margin. But it is still important to keep in mind that a past performance of any trading system or methodology is not necessarily indicative of future results.
Visit my Forex website and pick the trading area Forex. Download the simple and user-friendly trading platform for free and start testing the Bollinger Bands and the Stochastic trading strategy. It only takes a few minutes to download. The indicators are at the f (x) button above the currency pair graph.
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