What Indicators should you use to trade Forex?
In this video:
00:29 – Selecting which indicators to use
01:02 – To the novice trader, the array of indicators is fascinating
01:48 – Leads to complete confusion and analysis paralysis
02:10 – The important thing is the price
02:40 – Don’t clutter your screen
03:05 – 95% of all Forex traders don’t make money
03:55 – Look at the strength or weakness of each currency
04:25 – No one system suits everyone
05:03 – Get out of your trading rut
05:55 – Everyone wants to be consistently profitable
What indicators should you use as a Forex trader? Let's talk about that more right now.
Hi traders, Andrew Mitchem here, the owner of The Forex Trading Coach. Today, It's Friday, the 20th of May.
Selecting which indicators to use
In this video and podcast I want to talk about something that's so, so important and it's all about selecting which indicators you should use as a trader. You see, the problem is as traders we are completely inundated with all number of technical indicators. Just go and have a look at any system out there, any e-book, any robot, any robot back testing software, any trading platform. Anything on the internet to do with a trading system or a Forex platform you will find that there are just so many indicators on there, completely overloaded.
To the novice trader, the array of indicators is fascinating
Now, for the novice trader that actually looks so cool, it's really impressive. I remember about 12, 13 years ago when I started trading. I was going online, I was researching all these different indicators and names, who invented them, why, how they're created, why those levels are used, why the optimization levels are used, what time frames they could be used on. I was getting printout after printout of all this informational indicators and I just was absolutely, just absolutely thought it was just so cool. I added them to my charts and I could see how when this line crossed over that line the price would then go up just as it said.
Then of course you go adding more and more indicators together and you get lines and dots and hash marks and you get all this stuff over your chart.
Leads to complete confusion and analysis paralysis
The problem is that you get complete confusion and now there's this paralysis, think of it like that. You get lines everywhere. The problem is, what you end up doing is you see the price like this, this tiny little area at the top or the bottom of the chart is the actual price. What the indicators do is they take your mind away from what is the important thing.
The important thing is the price
The important thing is the price. Where is the price right now? What is the price of the currency pair? What's the candle pattern looking like? What's the overall strength and weakness of that pair? Where abouts within the chart does this price occur right now? Has it got room to move up even further to your profit target level? If I put my stock down at this level, is that a safe level for a reason. Yes or no?
Don’t clutter your screen
When you just clutter your screen with lines and charts and dots and wiggly lines it just takes your mind away from the real important thing. Just how to think about any different trading platform that you've tried, whether it be MT4, Trade Station, whatever it might be. Those platforms are completely inundated and overloaded with all these flashy looking indicators.
95% of all Forex traders don’t make money
Also think of it this way. Supposedly, the figures that we hear are 95% of all Forex traders lose money or don't make money. Yet I can be fairly sure that probably 95% of all Forex traders out there use far too many indicators so you can see there's a bit of a correlation there.
Do I use indicators in my trading? Yes I do, absolutely I do but I use a select few indicators. I mainly focus on the price. I look at where the price is right now, what's it been doing? I look at horizontal support and resistance levels. I look at round numbers. I look at where the price is in relationship to where it might be able to move to before it finds its next form of support or resistance to ensure that my profit target has a good chance of getting there. My stop loss has a good chance of protecting the trade and not being stomped out.
Look at the strength or weakness of each currency
I'm looking at the strength and weakness of that currency. Is that currency looking strong against all other currencies? Is that pair looking strong or weak for this week, for this day? If you're trading then on 15 minute charts, is the four hour chart or is the one hour chart looking strong or weak right now for that pair? Am I looking for a reversal signal or a continuation signal? Yes, I use some indicators.
No one system suits everyone
Now, I'm not saying that my system's perfect because there is no one system fits all approach to trading, definitely not. There certainly are a lot of very wrong ways and incorrect ways of trading.
My message in this video and this podcast to you is if you're finding yourself completely confused because on one time frame you're seeing a buy signal, on another time frame you're seeing a sell signal and you don't know what to do and this line's going up and this line's going up, but these couple are going down. You're thinking, “Well, where do I go because this is telling me buy, this is telling me sell?” You know what I'm talking about. If you're either brand new to trading you're probably in this situation right now.
Get out of your trading rut
If you've been trading for any length of time then guarantee you've been through this and may even still be in this bit of a rut right now within your trading.
Can I help you with that? Well, I believe I can because I like to simplify my trading. If you have not been on one of my webinars check out one of my webinars. On those webinars I give a really good introduction to how I trade and the advantages of Forex trading as a newbie trader but also how I trade and how I have been through all those issues as a trader. If you're an experienced trader, jump on to that experience trader or frustrated trader webinar because I can help shortcut some of those frustrations and those experiences that you're likely about to get into. I can shortcut that and get you to the level that enables you to understand the market and enables you to start being a consistently profitable Forex trader.
Everyone wants to be consistently profitable
After all, that is all we want, isn't it? We want to be consistently profitable; otherwise, why are we trading?
I hope that helps. Remember, get rid of most of those indicators that are on your chart right now, they will not be helping you.
This is Andrew Mitchem, The Forex Trading Coach, hope you've enjoyed this session. I look forward to bringing you another webinar and podcast this time next week.