I've been studying the foreign exchange market hours each day for over a year. I've also read piles of books on technical trading strategies, economic indicators, market timing, psychological discipline, stocks, bonds, futures, options, etc. I practice trading forex on a demo account as well as on a real mini-lot account. No matter what I try, my results are always slightly worse than 50/50. I'm seriously beginning to think that NOBODY trading forex makes any money in the long run. I don't just say this because I suck, but because I think it is statistically impossible to win at a game of random incremental price movements after paying a spread. I've sometimes made up to $20,000 on my demo platform, but I always eventually lose more than I gained--which is exactly how I would expect to perform at a completely random game after paying a fee each time I play. Don't get me wrong when I call it a game: I take trading very seriously.

Does anyone consistently make a profit trading forex? Please don't answer this question in the affirmative unless you yourself make consistent profits.

Cheers,

Kakuzo
I wasn't expecting such an undertone of aggression, but I think I understand why so many of these answers border on insulting. In psychoanalysis, this is refered to as "projection." It is likely that none of you have ever held on to any profits trading forex, but you devoutly believe in the religion of technical and fundamental analysis and do not want to come to terms with that fact that your devotion has not payed off financially--YET (of course). I know exactly what it feels like to be a learned master of trading principles and techniques but personally unable to make any money at it. It's very frustrating, isn't it? I'm convinced that EVERYONE online (or almost everyone) talking about forex is knowledgeable about the concepts but nevertheless unable to do anything about it. It is easy to discuss scientific-sounding nonsense like fibbonacci retracements, stochastic oscillators, linear regression, Bollinger Bands, EMA and MACD crossovers, support and resista
nce levels, candlestick patterns, and so on. For the record, I have read all the books I claim to have read and continue to read, and I practice regularly with different trading systems, none of which so far have been successful more often than they been unsuccessful. My failure rate is consistently slighlty less than 50%. And here's the thing: that is EXACTLY how you should expect to perform when the odds are 50/50 minus a charge for the spread.

Try this. One of the systems I use is the coin toss. I have found that it actually does no better and no worse than any other system, though of course I haven't tried them all. I doubt that a better system exists.

Answer
You left out the most important piece of information: your choice of time frame. Shorter time frames like 1-minute bars are random. A bank might get their next 10MM order from a customer now or five min from now. You can't trade short term news either. The big banks have traders 24/7 watching multiple premium news feeds. By the time you and I find out about it, the banks have already digested the information and taken their positions and moved on.

Stick to longer period charts.

How best to use MACD for technical analysis?

I have been using moving average convergence/divergence and moving average crossovers as trading signals for forex trading but the success rate has been quite low. Most of the times the trades end up meeting the stop-loss. Could someone please let me know the reasons and suggest some better strategies?

Answer
I will try to be short in my answer:

1) MACD or moving averages crossover gives you a buy signal and you buy but the trend in that time frame (will elaborate later) was either downtrend or sideways movement. What are the chances of the buy signal to be true? I would say very less if the take profit target is too ambitious or too far. Action required: Check the status of the trend. You can use indicators like ADX (Average Directional Index) for the same.

2) Trend was in your favor i.e. an uptrend (but not a very strong uptrend) when you placed a long trade based on the crossover signal but what was the volatility of the price movement? In any trend the price retraces back. let's say you are trading on an hourly chart but the average volatility per hour is 50 pips and you placed your stop-loss at 20 pips. The uptrend is no very strong and price retraces back 25 pips before moving upwards again and your position meets the stop-loss. Well, this example needs more elaboration but the summary is that our stop-losses need to have a relationship with the volatility of the movement. If volatility is high then a stop-loss at a narrow gap make make your trade go into losses.

3) You are trading on short-term time frame chart based on the trend of longer time frame chart. The trend situation and the validity of the signals differ from one time frame to another time frame. A daily chart may be showing an uptrend but there may be a downtrend on a 30 minutes' chart. You should consult longer term charts to know the general trend but if you are using shorter time frame charts for your trades then your entry, exit, stop-losses and take profit targets need to be based on that shorter time frame chart.

Summary: You need to be sure about the trend, volatility of the price movement and be very careful of the time frame of the charts you are trading with. Always keep an eye on the larger picture for general trend and the short-term picture for the actual trades 9for short-term trades).

You may find some good information including some of the trading strategies about MACD at http://www.forexabode.com/technical-analysis/macd

Let me quickly touch upon Moving averages also. Apart from all the points above, you need to work with the time frames of moving averages for better crossover signals. I would suggest you to try 2 combinations.

1) 5-period and 22-period moving average crossovers.
2) 10 period and 22-period moving average crossovers

The above two are for double crossovers but if you wish to further cut down the false signals then you may wish to try triple crossovers e.g. 5, 22 and 55 period. But be very careful with the triple crossover as the trend needs to be really very strong with triple crossover signals otherwise by the time the triple crossover takes place, the trend may be reversing the direction and your signal may end up proving false.

You may find some good info about moving averages at http://www.forexabode.com/technical-analysis/moving-averages.