Who looks at historical data before developing a strategy?

Allright I just went into MT4 saved historical data into EXCEL once more and had some filters and statistical analysis running it over .

Who here actually did that before developing a strategy?

And if yes what did you learn?
If you did so could you please tell me about how you interpreted the data you found and why do you keep searching for a winning strategy in that mess?

To make more clear what i mean:
It appears as if theres a "Heisenbergs Theory of Markets" at play so whenever i find a correlation it at the same times means my risk/reward ratio lowers and finally ending up with a 50-50 gamble, take that and factor in spreads and your potential exploit is done for.

Either that or im not sophisticated enough when it comes to VBA and my analysis.

To further analyze:
The market(s) im looking at if not in a strong trend (and even then) are mostly a random walk. Candles mean almost nothing to future price action.

So what im doing is im looking at timeframes. A trade in essence is a bet that at some point later down the line the price will be higher or lower.
As a consequence stoplosses or take profits can be disregarded and we can just say we exit every trade after X amount of time.
If i was correct and the price 15 minutes later is in my favor i take that profit it its not i take a loss.
(On stoplosses: What adding a Stoploss/Tp does is artifically set your risk/reward to a certain level and consequently modify your odds of winning the trade which in theory (and according to my tests) about balances out.) Edit: Ok except if i set those parameters to unrealisticly high levels, set a tp to 0.5 eur USD who knows you might be rich in 10 years but you might also have jumped off a bridge beforehand.

I did several robots in history, which i tested on 10 years tick by tick data from Dukascopy bank, the robots tested combinations of combinations of indicators and technical setups, the results was very clear, none of that combination was profitable in 10 years term. For me its very clear sign, that if you want to trade, you need to make your own skill and make your own decisions. And most importent is to find your own edge over the market. For me its money management.

All forex systems only work over short periods in time. Systems never work long term.

I spent years examining historical data and still do. If it looks like, as you put it " a horrible mess ", then you have to unpick it until it no longer looks like a horrible mess, because as long as it does, you won't have a chance of trading it successfully. Develop a strategy, which can only be done by the use of historical data, and then using demo and much trial and error, see what works and what doesn't. This is the only way, and slowly but surely, like a puzzle, the pieces will start to fit together.

Most aspiring traders don't have the patience or application for this long, slow process, they want to start earning money immediately, which has the opposite effect in that they start losing money immediately.

Of course historical data is essential for building a strategy, and if like I was when I started out, you are serious about a career in trading, then you will devote all your spare time to pouring over the charts, identifying why price goes where it does and what it is most likely to do once it gets there, in short, identify S&R, both on the macro level, and the micro.

Firstly, there is no such thing as a " forex system ", only your system.

If you believe that whatever strategy/system you use only works over short periods of time, then you have clearly never developed a winning system - by which I mean the knowledge whereby a trader is able to identify trade opportunities and exit levels, because if you had, you would know that your statement is nonsense.

Learn how and why the markets move where they do, and this will serve you for life, and if, for any reason, there are changes in market behaviour, these will not happen overnight but gradually and you will be able to adjust and adapt to them.

This is what I am saying. I have devolved many systems automated them tested them on data of up to 10 years ago and they are only profitable intermittently. A particular system may only work for a selected period of time. The catch is you will never know in the future when it will stop working.

The best way I have found to trade is by applying various methods to enter a trade. The best way is tops and bottoms or supply and demand zones sus/res what ever you would like to all them . Break out patterns, trading in between trend channels. Chart patterns, and candle stick formation. I rely on a skill set more than a system. MM is the most important skill to learn.

This is why I say set systems dont work they eventually come undone.

Before brexit I had a system on cable would bring my on average 20 pips daily. Unfortunately since brexit it no long works.

Strategy is a different ball game, the OP does mention strategy.

A strategy not only encompasses past data is also is reliant on MM TP and SL levels. And what if market suddenly changes what will you do. What will you do and what measures have you taken in case of a flash crash? Can your account handle a flash crash of 1000pip? Knowing that brokers widen spreads of nearly as much in these events and price can jump the stop. Will you open numerous account to hedge or a news trading strategy where one order cancels another one out.

What I am trying to say is going over past data can be useful for learning but the only way to really learn how the market moves if by screen time. I have known traders testing their systems for over 10 years and still trading on demo back testing forward testing, then eventually give up.

Its better off learning a simple breakout strategy between 2 levels be patient for it to form then trade it. You could possibly use this same break out system all all pairs and just comb though them all scanning for it.

A friend of mine scans for 200SMA break outs on the daily or weekly time frames and just trades that. Normally he catches the big moves from that. Its just more patients waiting for it.

A simple 200ma break combined with fundamentals will always catch big moves in the market. But systems like when macd is this and ma is that on on this particular hr candle opens in conjunction with the rsi and tP will be here and sl will be there or what ever will only ever work over short periods.

But just looking at the 200 ma break on past data will give you more scope for better trading. Just so you know I dont really trade MA break outs but its just an example.

You cant rely on fundamental data when looking at historical data. and its fundamentals that drive the big moves.

I would advise any trader looking to develop a trading strategy should not stop after they’ve found an enticing entry strategy. A trader should look to exit strategies, trade size, and know when to not even consider a currency pair for their strategy so they have a well-rounded personalized strategy.

[quote=PaulDaemon;9286934]{quote} . " This is why I say set systems dont work they eventually come undone........ What I am trying to say is going over past data can be useful for learning but the only way to really learn how the market moves if by screen time. I have known traders testing their systems for over 10 years and still trading on demo back testing forward testing, then eventually give up. "

These are important points you make. People actually get too fived on ' Systems ', as if there is a system that will rigidly work if A crosses B or C gets beneath D. trading is never like that unfortunately, because where A crossing B yesterday produced a wonderful trading opportunity, the same thing today may not because today nothing is as it was yesterday...the only way for yesterday's result to be guaranteed is if everything down to the minutest detail was exactly the same, and that could never be. All a system is in reality therefore is an empirical knowledge inside the head of a trader which enables them to identify opportunities before and as they arise, so that it is already known in advance from that day's price action whether A crossing B is going to produce a trading opportunity or not.

You are right, backtesting cannot teach one how to trade, but it is an essential component of the learning process for it is the only way of finding out what the market has done in the past, and it is essential because the parameters that have guided price historically, will continue to do so going forward, and this is one of the wonders of trading, because markets are driven by human nature, and that, never ever changes.

Then of course, via trial and error, we have to use this to predict price movement in the live markets, an altogether more difficult task, not least because unlike the historical charts where we can see exactly what happened, when we trade live we are essentially trading blind, and even though our indicators may be signalling a trade, it is a leap into the unknown, and this is very very difficult for most inexperienced traders to get used to. I like to compare it to pilots flying at night. The pilot without his instruments is completely blind and to rely on his senses alone would be catastrophic, as many WW2 pilots flying at night discovered to their cost. This means even though your senses tell you you are flying upside down, if your instruments do not confirm this, then go with the instruments, every time. In trading terms this means if a trader has the signal to pull the trigger, this is what he or she must do, without hesitation, even though the chart to the right of where you are entering is as blank as a sheet of paper, just like the blackness of the night sky beyond the pilot's windscreen. Like the pilot, you have to trust your instruments and take the plunge.

That said, most traders do not even get to the stage where they are able to objectively identify trading opportunities, taking more of a ' not sure, let's hope for the best ' approach to trading, which is why, needless to say, most ultimately fail.

Sorry for taking forever to reply, i was under the impression that id get a mail when someone replied to this thread unfortunately i didnt >.>.

Ill keep looking indeed but so far it seems like "a mess" maybe you have some tips on what to look out for? Im not expecting you to tell me a strategy im not expecting to get to a strategy without work however the more i analyze the more i get under the impression that prices are influenced by real world events and only those meaning historical data is more or less useless.

Theres one observation im looking into currently: And that one is the market doesnt like doing the same thing twice maybe i find more luck there. Look at historical data assume im not the only one seeing that shit and act accordingly.

The market always does the same thing twice, in fact, it repeats itself over and over though obviously not identically, and this is why traders are able to predict price movement. Your challenge as a trader is to learn to identify these patterns and use them to predict which way the price is likely to go. It took me several years to learn how to do this, and I am not particularly obtuse. Remember one thing..it is human nature that drives the markets, and human nature is entirely predictable.

If you want to see some of the stuff I have posted, as you asked for tips on what to look for, then have a look at some of my threads, especially ' Trader's Academy ', and ' The big Secret '. There's some good stuff on them, not necessarily from me, but from others.

Historical data is one of the best information the market could ever revealed.
It is the origin of any indicator developed in whatever form.
It is mathematical, accurate, and the most viable information that the market
could ever supply to any trader.
Analysing them depends on you and how you play around with them.
Dont ignore them

If by historical data you mean historical price data then it is NOT the most important. Fundamentals will disregard any lines, triangles, or squares on any other junk in your chart. It will just blow through them with no regard.

- Zeus Da Man

ah gotcha, diving into MT4 n crunching numbers in excel huh, thats the real deal man, mad respect for that grind, who else got their hands dirty with historical data before they even dreamt up a strategy, n if ya did, whatd ya learn, spill the beans man, if u got into the whole statistical analysis thing could ya share how u read that data n why keep digging for that golden strategy in all that mess
to break it down, seems like u talking bout some heisenbergs theory of markets stuff, so whenever u find a correlation suddenly your risk reward ratio just tanks n u end up playing a 50-50 game, factor in those spreads n any edge u thought u had, poof gone, either that or maybe just maybe the vba n analysis aint cutting it
n then theres the markets u looking at, not sticking to a trend mostly just doing the random walk thing where candles barely hint at what prices might do next
so what u doing now, looking at timeframes right, trading is like betting that down the line prices gonna swing up or down, forget stoplosses or take profits just exit a trade after x amount of time, if u were right n the price after like 15 mins is looking good, u take that profit, if not its a loss right, adding a stoploss or tp just pins your risk reward to a set level and messes with your win odds which from what u saying sorta balances out in the end, except if u go wild setting those to crazy high levels like set a tp to 0.5 eur usd who knows, might strike it rich or end up not so great
keep at it man, keep turning those stones, who knows what youll find or not, thats the game ain't it