A Forex Trading Tutorial On Why Indicators Don't Work


The last 10 or 15 years of trading has been quite interesting.  Obviously technology has had a major impact on just about every facet of the world.  It's not any different in trading. But has it really helped us?

price actionOne thing is obvious, is that we have a lot more toys at our disposal than ever before. This is doubly true for indicators.  Even the free charting platforms, have hundreds of different kinds of indicators at your disposal. But do these actually benefit you? 

In this forex trading tutorial, I will go over all the negatives that trading indicators have.

They are all lagging:  It's true, they are only telling you what you already know.  For example, the stochastics indicator.  When you see the two lines cross upward and downward signifying a strong move one way or another, the move has already happened.  The indicator is too late to the party.  As opposed to something like forex price action, which provides a trader leading information.

No one really knows what any of them do: If you ask most traders about your basic indicators like stochastics, MACD, RSI, etc... most can tell you about how to use them for a mechanical trading system but if you are looking for a deeper understanding of what they do, chances are most people don't have a clue.  They'll usually just tell you that they'll buy when the two lines cross each other.  That's about the extent of it. 

If they are so useful, how come so many people are losing money?: Seriously, since indicators are supposed to be tools that are 100% mechanical, why are there so many people struggling? The trading rules should be somewhat universal, yet there are only 5% of forex traders actually making money.  That's something to think about.

You are only as good as your indicators are: When you use indicators, you are going to live and die by them.  This basically means that all traders are created equal, and you better hope your indicators are having a "good day" reading the market, otherwise its going to be a long day for you.

You are not even looking at the price: Don't you find it kind of strange that technically you don't even have to look at the price of the currency, when you use forex scalping indicators?  All you are really waiting for are all your indicators to line up. The price is really not that important, if you go by that rationale. When you think about it like that, it is kind of absurd, don't you think?



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