Learning to analyze Forex historical data can be an invaluable way to increase your profitability on any trades you plan to execute. For anyone planning to exchange currency for profit should learn to understand how the value of various currency pairings can move through definable trends.
What is Forex Historical Data?
Forex historical data shows the past changes in price for any currency over a specified period of time. A complete listing of the exchange rates for foreign currencies is then plotted to a chart that enables you to pin-point sections of pricing movement within that chart.
Comparing more than one currency as your basis trading pair can indicate the likelihood of the historical patterns in price changes repeating. These changes in price are called trends.
These trends show definite pricing movements, both up and down, over periods of time that can help to solidify your trading strategy. The further back your Forex historical data extends, the more chance you have of recognizing a trend.
Once a pricing trend has been recognized within your Forex historical data for the currency pair you’re considering, it becomes much easier to plot buy trade points and sell trade points. These trading signals become your way of knowing when will be the best time to buy and when to sell to minimize losses and maximize profits.
Automating Forex Historical Data:
The foreign currency exchange markets can be extremely volatile. This can mean that a definite trend you might have noticed in your data may be completely different again by the time you log into your trading account place your trade.
It is possible to purchase various software programs that enable you to enter Forex historical data for several currency pairs at a time. The software then plots various pricing indicator points automatically, picking out potential trends for you. The further back your data extends, the more likely your software will pick accurate pricing indicators.
Back-Testing With Forex Historical Data:
All trading software is only as good as the person using it. Before you entrust your entire foreign currency trading strategy to a piece of software, you should always take time to back-test its accuracy. This way you can be more confident that the software really is able to pick trends as they happen and create trading signals that will increase your profits.
Back testing requires that you input as much Forex historical data as possible to allow the software to work through the pricing changes as they happened. Your back testing results should show signs of profitability, which then gives your software plenty of data to continue plotting new trade indicators as you move into real-time data and real money from your trading account.