So you’ve started out forex trading and are excited about how much money you’re about to make, all you need to do is get stuck in. But when should you trade? Where should you enter? Which currency pairs should you be looking at?
Imagine if there was a solution that told you exactly when to enter a trade!
Rookie trader, meet Mr Indicator. Forget those silly heikin ashi candles, that shit is just too complex.
What on earth is a bullish engulfing candle formation anyway? I’m a rookie, I don’t know, or care, I just wanna make money damn it! Show me the easiest way to make money right noooooow!
These magical indicators will tell you what to do. Like a Magic 8-ball. They’ll show you the way to the holy land of forex glory, where the streets are paved in green pips, and everyone you meet gives you a bar of bullion, just because you deserve it.
It reminds me of my favourite Guns n Roses track “Take me down to the paradise city where the pips are green and the charts are pretty, oh won’t you please take me home, whaow ouw”
So, what exactly is a MACD, CCI, ATR, RSI or a bloody Stochastic!
They all sound so scientific; surely they must be good?
Well, I’m sorry to burst your bubble… but this is just another way to read price movements in the market (some traders like to call this price action). An indicator is lot more like salt and pepper than Colonel Sanders 12 secret herbs and spices.
If you only learn one thing today, make it this: As traders, we only have access to a very limited amount of information.
These are the only two things we know for sure:
- What price is now
- What price was 1min, 5mins, 15mins, 1hr (you get the idea) ago
All indicators are doing is showing you this information in a different format.
Now, for all the indicator fans out there, you’ll be pleased to know it’s not all hogwash. Indicators are designed to show previous patterns in the market that might not be easy to see with the naked eye. And the theory goes, if you can identify a pattern from the past, then you’ll be able to predict the future. But that’s a debate for another day.
Can forex traders predict the future? That’s a great topic for my next blog post…hang on, let me write that down…
Ok, I’m back. Now, the topic at hand – Which indicator should you use?
Whichever one you want.
Sorry, I know that’s probably a little underwhelming…
All it’s doing is showing you what you already know (present and past market price) in a different visual format. So find an indicator you understand, then stick with it.
My only piece of advice is to avoid running multiple indicators at once because you’ll likely confuse yourself.
Looks like it’s time to buy, sell, hold and spin.
Personally, I like to trade naked. Yup, starkers.
You will likely find once you watch the charts for long enough, you won’t need the mystic Ichimoku Cloud to provide you with a weather forecast. You’ll be able to look up at the sky and tell for yourself whether you’ll need an umbrella for the session ahead.
Please let me know what you think? Am I crazy? Do you use one or more indicators and do they help you with your trading?
Continue reading – Do trendlines work in forex trading?
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