When it comes to forex trading a lot of time and effort is needed to develop insight into the markets, many market participants have been in the game for many years and have first-hand experience of market patterns, from this they have developed instincts based on past experience. Subconsciously what these experienced traders are doing is recalling what the markets have done in the past and predicting a repeat of this action. For traders new to the markets they do not have this experience so need to look for insight in other ways for this, they can use the raw historical data, in theory, the data is just a record of how the market behaves.
How can I leverage this historical data to my advantage?
The data can be used in several ways:
Charts - The simplest way to gain value from Market Data is by viewing the data in the charts. You can see patterns and look for repeats of those patterns to predict what the market will do next.
Automated Analysis(Trading Robots) - A more complicated way to use historical market data is via an automated program, these programs use powerful computers to read in historical data and look for patterns and movement in historical data and detect them in real-time data.
TraderMade offers free monthly access to short and medium-term market data and cost-effective bulk data downloads or contacts our team via live chart to discuss your requirement in detail.
What are the data options and how to download them?
As outlined above, charting applications and trading robots help to check the efficiency (performance) of your strategy, by leveraging Price Action Patterns from a deep history of quotes.
For Forex indicators to work at their optimum a full and substation history of quote data is required. TraderMade has data available back 30+ years for:
Tick Data - Every Traded Price
Minute Data - Summarised tick data into subsets of min
Hour Data - Summarised tick data into subsets of hour
Daily Data - Summarised tick data into subsets of Daily
Weekly Data - Summarised tick data into subsets of Weekly
Monthly Data - Summarised tick data into subsets of Monthly
For Tick data, each price will have either a mid-rate or bid and ask and a timestamp. Summarised data will consist of a candlestick Open, High, Low, Close, and a timestamp. Some sources may also provide a tick volume but the usefulness of this data is less valuable than that of an exchange-traded instrument as all you are seeing is a given provider's value.
Mining the Data
By utilizing data mining you can analyze huge amounts of data, As computers have increased in power the ability to mine data has also improved and the numbers of people doing this have also increased leading to an increase in the open house libraries to perform such operations, Python has some very useful open source libs such as TMLib and Pandas. Restrictions on your ability to data-mine would be your hardware, disk space, and CPU.
A popular way to analyze historical data is using backtesting, backtesting works by applying a method or strategy to a historical dataset to look for patterns and triggers. The data that backtesting will produce can be utilized by automated trading systems, algorithmic trading, and as a part of a manual trading strategy.
When performing backtesting some time need to be spent working out a strategy and then when the backtesting is performed it will give you valuable information, the Number of Opportunities based on the strategy, How many time could a successful trade have been performed and the Risk vs Reward for the strategy.
You must still be careful with backtesting although a strategy based on historical trends may appear to be successful more times than it is not historical performance is no guaranteed indicator of future behavior.
Where can I get historical data for BackTesting?
TraderMade offer a wide range of historical data, Tick, Minute(multiple durations, 1m,2m...30min), Daily, Weekly, and Monthly. To learn how to download historical data include our free offering of 5 Years of Daily history, 2 months of hourly data and 2 days of Minute data see our tutorial.
Historical data analysis can prove to be a very useful and detailed review of market historical behavior is a common tool in the arsenal of any successful trader, however, you must be careful as not all historical market data is created equal. TraderMade has been dealing in Charting and Historical market data for over 30 years and has some of the best market data in the industry.