I've been trading the forex markets for a good few years now and even though I have a few tried and tested systems that I use, I still enjoy learning about different technical indicators and examining how effective they are.

However one thing that I've learnt is that there is a big difference between backtesting a particular technical indicator and making live trading decisions in real time.

For example, often you will look through historical charts and you will see clear signs of where your technical indicator provided a strong signal which would have yielded you a nice profit.

However, there are also numerous times when you trade in real time and you get the same signal but it turns out to be a false signal or a sharp reversal, and of course this signal will often not show up on historical charts.

A classic example of this is my recent experiment with the ADX indicator. The other week I was experimenting with it and was using the crossover upwards of the 20 level to signal that a new trend was emerging.

However despite looking at a lot of historical charts and noticing how effective a signal it was, I quickly learned that in real time things are not as clear cut because it can reach the 20 level, you can enter a trade, and it can quickly reverse back below 20. Then of course when you look at the historical chart later on this move to the 20 level doesn't appear after that particular candle or bar has closed.

So you have to be very careful when analysing historical charts and thinking you're onto a winner, because the reality is often somewhat different when you are making trading decisions in real time, as false moves or signals will often not later appear on the charts.

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