Traders are in the business of making money! Backtesting involves retroactively testing the parameters of the indicators against historical price action. For now, just take a look at the parameters we used for our backtest. We simply cover and switch position once a new signal appears. This means if we initially had a long position when the indicator told us to sell, we would cover and establish a new short position.
This is just for illustrative purposes only! Moving on, here are the results of our backtest:. The data showed that over the past 5-years, the indicator that performed the best on its own was the Ichimoku Kinko Hyo indicator.
Surprisingly, the rest of the technical indicators were a lot less profitable, with the Stochastic indicator showing a return of negative However, this does not mean that the Ichimoku Kinko Hyo indicator is the best or that technical indicators as a whole are useless. Think of all those martial arts movies you watched growing up. The Rock used a combination of moves to get the job done.
Forex trading is similar. It is an art and as traders, we need to learn how to use and combine the tools at hand in order to come up with a system that works for us. This brings us to our next lesson: You cannot discover new oceans unless you have the courage to lose sight of the shore.
Partner Center Find a Broker. Cover and go long when daily closing price crosses below lower band. Cover and go short when daily closing price crosses above upper band. Cover and go long when daily closing price crosses above ParSAR. Cover and go short when daily closing price crosses below ParSAR. Cover and go long when RSI crosses above Cover and go short when RSI crosses below Cover and go long when conversion line crosses above baseline.
Cover and go short when conversion line crosses below base line.More...