Advantages of Computers in FOREX Technical Analysis

Technical analysis is the preferred trading method for many traders, big and small, institutional and individual. See Technical Analysis, for a summary of technical analysis ideas.

Computers are an obvious aid to doing technical analysis studies, both for finding new methods and testing old ones. A computer can help in two areas. Complicated ideas and data sets can be easily manipulated by a computer. A computer can test a trading method quickly and over an extensive database of historical prices for a wide range of currency pairs and market environments.
This is a good check on the human mind's tendency to generalize with limited data.

The power of computers has increased many-fold over the past 40 years. I began research in 1974 with a Data General Super Nova, a $70,000 mini-computer, which would be no match today for a $400 laptop from Wal-Mart. If Moore's Law regarding the doubling of computer speeds holds up, computers in 20 years will be more powerful than anything imagined today.

My mentor did not like the advent of computers for trading. Not long before he passed, I showed him an early program that allowed the user to reformat price data into hourly and 5-minute charts. "Just more rope to hang yourself" was his only comment. One does have to ask the question: In the past 25 years, have access to computers changed the ratio of winners to losers in the markets? My guess is not much, if any. Winning is more about money management and attitude than it is trading method or being able to torture the data in a thousand and one ways.

A trader can create new indicators, for example, using a standard programming language such as Visual Basic 6, C++, or C#, or he can use the languages built into trading platforms such as MetaTrader MQL4 and NinjaTrader's NinjaScript. The advantage of the latter is that the indicator may be both tested and applied to trading within the platform. If you program in an external language, you must work with your broker's application program interface (API) to port the program -- and that can get messy.

The amount of research taking place in this arena is staggering. There are several forums online just dealing with the MetaTrader languages MQL4 and MQL5 and substantial activity in other scripting languages such as EasyLanguage (TradeStation), EFS (eSignal), and NinjaScript (NinjaTrader).
By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2016. Content published with author's permission.

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