The human mind is conditioned to a make-believe that, “complicated” is the best and surefire way to success. Whilst this may be true and applicable to many phases in life, it certainly isn’t so in forex trading. Before rising through the ranks of trading, the first strategies noobs usually come into contact with is based on forex trading indicators.
The thing with forex trading indicators are that; they read price action using a set of mathematical theories whilst the mind of the trader can do so simply without such distractions. Reading price action with forex trading indicators is complicated, reading raw price action from the naked charts is simple and easy! You don’t have to attain an MBA before you can do so.
What forex trading indicators usually do.
When beginners set out on the rough journey of forex trading, they mostly fall for the idea that forex trading indicators are going to work out for them. This idea is not only absurd but misleading as well, and it is so because indicators are guilty of two crimes; if they are not lagging, they are leading.
Lagging in the sense that, they delay in the printing out of a signal to buy or sell, causing them to react only after price has moved steeply. By leading, they react faster to swift price movements, affording the newbie trader the opportunity to take wrong trades on false signals, with all sense of confidence. This is not only detrimental to the emotions of the trader; it also makes his or her mind succumb to an untruth that, trading is nothing short of gambling and only the lucky ones survive the longest.
For those of you who get lucky enough to see the truth with naked charts and price action trading, doesn’t it make you wonder whether your broker set you up to fail? Why am saying this? Cast your mind back to the first time you downloaded and installed the meta trader app on your device; the first things that said hi to you were currency pair charts with a plethora of forex trading indicators.
A sneak peek into my journey.
I don’t know about you but when I set out to trade; I was so overjoyed to see those fancy tools on my charts. Funny enough, I thought I was going to milk the market with those, and chill with Richard Branson on Necker Island during holidays. Well, you know how the story ended.
For the sake of those who don’t know; I had actually read thoroughly on forex trading indicators from babypips; so I added the RSI, the MACD, the parabolic SAR and the moving average to the already cluttered chart; to create a template for use throughout my charts. ‘Unluckily’ enough, I made profits that very first day but the account’s lifespan was a week. Today I look back and I tell myself; it’s no surprise that I couldn’t make it with them.
A part of that failure was also due to poor risk management. After I had learned how to manage risk; I still couldn’t keep my profits whilst using the indicator based trading strategies over the long run. This is one of the sour reasons why I don’t teach forex trading indicators in any of my modules.
Maybe just maybe, the mistake was with me and not with the indicators. There are a 1001 trading strategies in the world; every trader has that one which is profitable for him or her, forex trading indicators inclusive. But I know one thing for sure, that is, when it comes to trading strategies; price action is king.
A case against indicator based trading strategies.
I have seen whack indicator-based traders becoming consistently profitable after bumping into price action. I have seen majority of traders bastardizing indicators as they would a terrorist. In his book, “smart money forex trading method”; Phil Gangluff dedicated a whole chapter to indicators but it was titled, “Indicators are evil”.
A paragraph in that chapter reads, “Depending on how long you have been trading with indicators, this might sound scary or even foolish! If you are one of those traders who only knows how to trade with indicators, then it can be hard to fathom the idea of giving them up because of the false sense of security they provide. Indicators are like a crutch that make traders think they have an understanding of the Forex market, but they don’t. In reality you’re not really trading the Forex market, you’re really just plugging numbers into a few mathematical formulas.” So there you have it, just one of the many wars waged against forex trading indicators.
All the above are the reasons why I conduct my analysis this way.
If not with forex trading indicators, then with what?
All I’ve been preaching alongside relegating forex trading indicators to the background is price action. It is not the holy grail but it almost is. It would not make you the perfect trader; but it would bring you a perfect understanding of how the market moves. This in turn will go a long way to help you in your trading journey.
In fact, there exists a 101 enemies of indicators but I doubt if price action has many. If it has any, then only a handful. You might have read or heard that the trend is your friend; the good news is that price action is your friend too. Would you like to reciprocate the gesture of the friendship it’s throwing at you? If yes, then study and master this module.
This post of mine may appear as a rant against forex trading indicators; but it is based on my personal experience and the experiences of fellow traders. It is purely a subjective view. That it did not work for me does not mean it cannot work for you. The forex market is deep and different things work for different people.
I would like to know the experience you have also had with forex trading indicators; your views and queries are welcome in the comment section.