Select trading assets of the forex market for the regular trading
Every new player on the financial market is initially guided by basic tradingrules and principles. Simply put, he uses ready-made trading strategies, which you can find online in unrealistically huge amount. Of course, only some of them is a working tool, but that is another question. And surely, each of us, who has seen these systems, has noticed that their description includes the list of financial instruments, that are needed for trading.
Why are some strategies effective only on a limited list of tools? Primarily, this is due to the fact, that these currency pairs demonstrate positive dynamics on historical testing. And secondly, as a rule, they include the most popular assets.
But how to choose the best fix api for Forex market tools for your trading? The answer to this question I will help you to find today.
Parameters, that you need to pay attention in the choice of assets for trading:
- Spread. I recommend to choose the asset with the lowest spread. It means, those, which are sold by majority of the market participants and which has supply and demand. Such assets include EURUSD, EURGBP, GBPUSD, USDJPY, USDCAD, AUDUSD, NZDUSD. Simply put – trade “the majors“. They are quite mobile and don’t have a huge spread. Even if the broker will set the margin, it will not be so substantial and significant.
- The value of an asset (point). Similarly, as the option above, here I recommend to use the same majors. And there’s a good reason: if you sell exotic, then fundamental factors and the price of the asset will increase risks. So, if we are going to trade USDMXN, the average daily volatility is always high and respectively 100 points of risk will promise a loss of significant funds. Focus on the ATR indicator – https://www.dailyfx.com/forex/education/trading_tips/post_of_the_day/2013/10/28/How_to_use_ATR_in_a_Forex_Strategy.html. If the asset is constantly higher than the average market data, think twice before you include it in your fix api trading list.
- Diversification. This is an important point. After all, if you have transactions only in the dollar, in the case of a position reversal, there is a threat to go deep in drawdown, even if the risks are met. I suggest to dilute your list with crosses (currency pairs that do not include the dollar).
- System testing in the strategy tester on those assets. This is not the first article, where I write about the strategy tester. And it always comes in the last paragraph. It’s simple: before you can apply the innovations on a real account, you should test them on historical performance. It will be much easier for trading robot to make it (http://forexzzz.com/product/forex-zzz-lock-arbitrage/), but this is a required item. I would recommend to leave those currency pairs, that demonstrate annual yield of 20% with your strategy, and those, which show less than 5%, you should exclude from your list.
Based on the parameters I gave above, you can make a simple conclusion: the asset must be very “mobile”, have a minimum percentage of correlation with other financial instruments, as well as show a positive trend on historical data. In combination, all of these parameters will allow you to create the most optimum list of assets, that you will face every day.
Moreover, if you will have around 8-12 assets, you will know them perfectly. I mean, you will save in mind the constant flow of information and the picture. Looking at the graph, you will be able instantly determine the future movement and the future situation for open positions.