One of the challenges with successful forex trading comes with putting historical forex data to its best use. On the one hand it seems self-evident that one great way to approach trading with forex would be to simply dump the entire historical data of forex trades into one big super computer, press a big red and have it dump out a winning trading strategy. Unfortunately, whilst that approach is actually good in theory, in practice that is more difficult then it sounds. The problem being that many systems end up becoming so optimised for the past, that they forget about the future entirely. Now that might work if you have a time machine, or a starring role in “Back To The Future”. But what tends to happen is that the past doesn’t equal the future even after you have poured over historical forex charts for weeks to really try to make it.
Now, I should add that good systems that work do exist. After trying a lot of REALLY bad ones I came across this forex system that really does work. But they are not common, so you need to be careful not to retrofit data if you do design your own.
Thinking About Historical Forex Data…
All that being said, historical forex data is still a useful tool. But it needs to be tempered with common sense. Whilst it may appear that trading somewhat has a life of its own these days with such an amazing variety of trading platforms and trading software. At the end of the day if you look beyond all the gadgetry, this is still a people business. The market may twist and turn for a while off the back of some big traders tricky tactics, but ultimately the fundamentals will kick in.
Is the economy expanding?
What is the state of the political climate?
What is the oil supply situation?
How is the real estate market recovering from the downturn?
So there is a lot to consider with this.
Using Historical Forex Data To Its Best Effect
It is when you start to piece together your own take on these type of questions that it becomes clearer how to use historical forex to its best effect. Namely as a bit like a cog in a mechanical watch. If you have ever visited a jewellers and looked at some of the beautiful transparent back watches from watch makers like Patek Philippe (browsing is free 
) then you will know what I mean.
There appear to be about 200 hundred things going on at the same time. One little wheel moving another wheel, a hinge turning a cog and so on. The watch ticks away seemingly oblivious to the fact that without any one of those small elements the entire watch would stop ticking. In a ways it’s a minor miracle that it works at all. But that miracle has been earned by literally hundreds of years of testing, honing and fine tuning by watchmakers everywhere. The same is true when we look at historical forex data. If you think of it like a cog, then you realise that it is only one part of the overall trading picture, and that there is a lot more to having a successful forex system then just the data.
This fact becomes clearer when you look at the mountain of historical data that it is now possible to get. You could honestly spend hundreds of hours number crunching it all, and still not be any closer to getting to the heart of what makes a consistently winning trading strategy. Because historical forex rates are not necessarily a crystal ball for the future. It needs to be placed in a whole context of the market, the psychology of traders and the madness of crowds. And even then do you really have the time to do all that work? If you do then great, but personally I prefer a more automated approach.