Part I. Debunking the Forex Myth / Chapter 5. Looking to the Future

A forecasting system and a prediction system in the Forex market are synonymous. Therefore, for our algorithm to be able to execute profitable trades, it must be able to "look into the future." You might be tempted to smile and mutter to yourself, "The author of this material is clearly joking and mocking the reader." But that's not the case. Let's reiterate that the core of the algorithm should be a system that predicts the future, and most importantly, it should be based on an analysis of the past!

In mathematics, there is a concept called function extrapolation. This process determines (predicts) the position of future points on a graph based on previous points. Many extrapolation algorithms work quite well and produce astonishing results at times. But don't rejoice just yet; almost all of these algorithms work with functions that can be defined by a mathematical equation, i.e., functions that have a constant mathematical expectation and variance. The Forex market cannot be described by a mathematical formula, at least not yet by anyone. Therefore, price fluctuations are a random process, and predicting a chaotic process based on retrospective data is a far from trivial task.

At this point, we would like to digress from presenting the material and confess to our readers. If we had indeed developed the mechanical trading system described above, this website would never exist, and the project's authors would be traveling from one global resort to another, enjoying life to the fullest. We are not brilliant scientists or fortunate individuals who stumbled upon a coveted algorithm. Like you, we are also searching for a way out of the labyrinth called Forex, just a few steps ahead. By presenting this material on this website, we are merely structuring the knowledge we have acquired, benefiting both ourselves and you. And now, let's return to our presentation.

For retrospective analysis of a function, you need a storage system for a vast amount of data, especially if you are working with hourly or minute charts. Therefore, in order to develop a mechanical trading system, you cannot do without a relational database management system (RDBMS). It is preferable to use industrial-grade RDBMS such as Oracle or MS SQL. If you are encountering this term for the first time, it is likely that you will either need to spend several years studying information technology or find someone (a partner) who is knowledgeable in the IT field to achieve the common goal.

Indeed, software platforms like MetaTrader 4.0 are equipped with the built-in MetaQuotes Language (MQL), but the capabilities of this language are quite limited. However, it has one very useful feature - the ability to import functions from external DLL modules. Considering the fact that external DLL modules can be written using the latest application development tools, traders have all the necessary tools at their disposal to develop a mechanical trading system. External DLL modules can easily facilitate communication with RDBMS on one side and the client terminal on the other, using the appropriate libraries. Once again, if you are not familiar with programming and all that it entails, you will need to find an IT specialist as your partner.

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