Price Action Vs Using Technical Indicators

Filed under: Learn Forex Trading |

A lot of novice traders like to use technical indicators to inform their trading decisions. While technical indicators do have their uses, the information is always lagging and beginner traders tend to focus too much on the indicators and not enough on the actual price action.

 

If you use too many indicators on your charts, they can bePicture 3come messy and difficult to see. The actual raw price action data becomes secondary and is hidden in the background. But it is raw price action that, without doubt, is the most important data on any price chart. Moreover, technical indicators should only really be used for confirmation signals only – a final check to confirm your suspicions that price is about to move in a certain direction. They should not really be used as the primary data to make your trading decisions.

 

By looking at a raw forex price action chart, you should be able to see much of what technical indictors are telling you anyway – and you should be able to see it before the technical indicators tell you (because they are lagging indicators). Being a successful forex trader is all about simplicity rather than making things complicated – the simpler the better. If you currently use a lot of indicators and are struggling to make any profits, try stripping off all of your indicators and look at some nice, clean, black and white candlestick charts. Mark in some area of support/resistance on these charts, and wait for any price action confirmation signals in the form of pin bars and engulfing patterns. Make sure that you have a positive risk-reward, and use a good system of money management (never risking more than 2% of your bank on any one trade). This is how I trade, and it is a method that has proven to have an edge.

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