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Forex Trading - Can You Use Too Many Technical Indicators

By: James Woolley

The majority of people who trade forex use technical analysis to make their trading decisions. They generally use a wide variety of the hundreds of technical indicators available at their disposal, but how many should you use if you want to be a profitable forex trader, and can you use too many?

There's no question that the internet, and the subsequent ease of access to technical charts and indicators, has led to more and more traders being able to learn and become accomplished at using technical analysis to help them make trading decisions.

Indeed, people will spend hours on end experimenting with numerous different technical indicators in order to find that holy grail combination that will help them to become rich from trading the forex markets.

However no combination will prove to be 100% successful. The key is to find a combination that suits your trading style, and enables you to make high probability trades that will give you a positive equity curve (ie profits) in the long run.

If you have a sound stop loss policy and a rigid and disciplined trading system based on certain indicators, then you can make a good income from forex trading.

You don't need to use several indicators at once. Indeed many top traders argue that you should minimise the number that you use, simply because the more you use, the more you will get conflicting information, and confusion and uncertainty does not equate to profits.

For instance you may use six different indicators to help you make your entry and exit positions, but you may, for example, have four of them indicating an oversold position and telling you to enter a long position, but the other two are crossing downwards and indicating a forthcoming downwards movement, so in this case you would probably abandon the initial long trade you were going to make.

This is further complicated when you use multiple time frames because this becomes even more of an issue. Multiple indicators over different time frames will invariably give you conflicting information and the net result will be that you end up not trading at all, and essentially always being afraid to take a position.

This is why so many top traders recommend using just a few tried and tested indicators. You don't need to have a really complex set-up to be successful. You can make a decent living from forex by just sticking to a few basic indicators like RSI, stochastics and MACD, or just using support and resistance levels to make trading decisions.

Furthermore, some traders, like Avi Frister for example, only use one indicator, and argue that it's the only one you really need - price.

So if you're striving to become a profitable trader, don't overcomplicate things. You can be just as successful using just a few simple indicators than constantly trying out the latest and greatest new indicators in order to find that elusive winning combination.

To read more about Avi Frister http://theforexarticles.com/forex-trading-machine-review/

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Forex charting is not just a tool but also an insight. The secret of successful trading is to take a step back from the market. Trade with the big picture in mind at all times and don't follow the day-to-day market movements that are temporary in nature. Daily market talk can misguide you and sometimes can hypnotize you if you follow it too deeply. You have to see the forest for the trees. That's why you need charting Software that shows you historical trend data as well as current intraday trend data.
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Another way that experienced brokers and traders in the Forex use to forecast the trends is called fundamental analysis. This method is used to forecast the future of price movements based on events that have not taken place yet. This can range from political changes, environmental factors and even natural disasters. Important factors and statistics are used to predict how it will affect supply and demand and the rates of the Forex. Most of the time, this method is not a reliable factor on its own, but is used in conjunction with technical analysis to form opinion about the changes in the Forex market.

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Before starting the forex trading, you should begin your Forex training. A professional instructor can assist you in learning different terminologies, concepts and process as a whole in forex trading. In a good Forex training, there are no high-pressure sales pitches, no tricks, and no hidden agendas, but just plain knowledge. Forex training provides traders the ability to take advantage of the foreign currency exchange. This Forex training empowers investors to become world-class forex traders.

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