Part I. Dispelling the myth about Forex / Chapter 6. Experience is the son of difficult mistakes

During our study of the Forex market, we have developed numerous technical indicators and trading advisors. For this purpose, we utilized a widely used trading platform called MetaTrader 4.0 with its built-in programming language MetaQuotes Language (MQL). Additionally, we used the Oracle 9i database management system (DBMS) to work with large sets of price data and the Borland C++ Builder 6 development environment for writing external DLL libraries. Despite our efforts, we were unable to create a "Holy Grail" that could consistently generate profits in a geometric progression. However, we did draw some conclusions from our findings, and we would like to share some of these insights with you in this section.

The core of a mechanical trading system should be a predictive system based on retrospective analysis of future price quotes. We have slightly modified this approach by not directly analyzing price quotes; instead, we analyze overbought and oversold levels in the market. There are many indicators created for this purpose, such as the Relative Strength Index (RSI). You can also create your own custom indicator for these purposes, as we have done. Typically, overbought and oversold levels fall within the range of 0% to 100%, making them convenient values for analysis.

In the future, your actions will depend entirely on your imagination and experience. You can apply one of the existing extrapolation algorithms to the obtained data or combine multiple algorithms into one. You can use the smoothing technique of Moving Averages to obtain a smoother graph, making it easier to analyze. However, keep in mind that every time you apply averaging to a price graph or its derivative, you are stepping back into the past, as all moving averages lag behind the graph.

Perhaps you will be a more successful researcher than us, and you will achieve the creation of a perfect system. At this moment, we lean towards the belief that the process of currency price changes in the Forex market is a chaotic process. Predicting its behavior is nearly an insurmountable task. However, for inquisitive minds, it may be within reach. We continue to work on finding the perfect mechanical trading system, and if such a system is ever created, unfortunately, you will never know about it ;-) That's just human psychology.

For those of you who are not inclined towards exact sciences and do not want to burden yourselves with complex calculations and algorithms, we can only advise trading on financial news. If you have any access to financial information before others, you are incredibly lucky. If not, you are merely a small boat in a vast stormy ocean. There is always a chance of reaching the shore; the question is the magnitude of that probability...

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