Keeping Your Charts Clean

Filed under: Learn Forex Trading |

I believe that it is beneficial for any new trader to keep charts as clean as possible. By this, I don’t mean printing them out and refraining from getting any coffee ring stains on them! I am talking about technical indicators.

 

Putting too many technical indicators on your charts is something that I like to call the Jackson Pollock Effect (because your charts inevitably end up looking like a Jackson Pollock painting – i.e. very abstract!). People who are new to trading the forex markets are bombarded with indicator after indicator. Beginners seem to think that if they can just find the right combination of indicators with the right parameters, then they will have a formula that will make them rich beyond their wildest dreams. This is a fool’s errand. There is no magic formula in forex trading – in fact, the simpler that you can keep it, the better.

 

When I first began trading forex, I too was using a lot of indicators. However, these days, I use only one or two, if any; and even when I do use an indicator such as an RSI, it is only to add one more layer of confluence (in the form of a price divergence). You should never trade with technical indicators alone, as the data is always lagging.

 

In summary, I would advocate clean white charts with no indicators overlaid on them at all other than a couple of moving averages to mark the trend (I use an 8-day EMA and a 21-day EMA). By doing this, you get to concentrate on what is actually the most important thing when trading forex, and that is price action itself. If you look out for price action signals at key areas of support/resistance, and in line with the dominant trend, then this is a good place to start – technical indicators should merely be another notch on your arrow.

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