Forex: Resisting Complexity

Filed under: Learn Forex Trading |

 

I think that one of the reasons why an alleged 95% of people fail in the forex markets is because generally, these people are making trading forex more complicated than it needs to be. Being the biggest market in the world and with around four billion dollars exchanging hands every day, the forex market attracts a lot of intelligent people who have been successful in other fields, and who expect a similar level of success in the forex markets. However, what they do wrong is use their brains TOO much! They use a whole host of technical indicators to try and assess the market, and in the end, their charts end up looking like a Jackson Pollock painting!

 

I believe that the best forex traders keep things simple – VERY simple. A clean chart with raw price action and perhaps a couple of moving averages are all that you really need to trade well. For some reason, people are drawn to technical indictors because they seem complicated and deeply mathematical (which they are). But in the end, all technical indicators are lagging, and they only tell us what has happened in the past.

 

Therefore, it is much better to look at raw price action, because this tells us what is happening in the market right NOW. Surely what is happening now is much more relevant to us than what has happened in the past! I would therefore suggest eliminating most, if not all technical indicators from your charts (for now at least), and perhaps you can use one or two later (as confirmation signals only) once you are comfortable with raw price action charts.

 

I trade using raw price action confirmation signals at significant levels of support and resistance. It is a simple method, but one that has proved to have an edge if you operate it with a risk-reward scenario of at least 1:2. So, try to resist the complexity of technical indictors for a while, and see how you do with a raw price action chart. You may find that you start to do much, much better.

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