Do you use indicators in your trading? If you’re like most traders then you are probably going to answer yes. You probably refuse to trade without an indicator of some type plastered to your charts. No I personally don’t believe in the use of indicators. I think that the best and dare I say only way to trade like a professional is to develop the ability to interpret price action for oneself as opposed to depending on indicators to do it for you. That being said I realize that trying to get an indicator addicted trader to go cold turkey is a near impossible feat, so I’m not going to try. Instead I am going to insist that if you are going to use indicators then you should at least learn the correct way to use them.
You see a lot of new traders use indicators in a manner that is completely wrong. So many traders put a bunch of indicators on their charts because they believe that the indicators are going to tell them what the market is going to do. That couldn’t be further from the truth because an indicator is no more capable of predicting what the market is going to do than you or I. They are called indicators for a reason, because they indicate what price may do. If they were able to predict the market then they would be called predictors. If you are a new trader then you are going to have to understand that if you are going to blindly follow the signals of indicators because you think the can forecast the markets then you are terribly mistaken.
So then, how should indicators be used? That’s simple instead of being used as the be all end all for your trading decisions, you should use them as a heads up of possible changing market conditions. So for example if the RSI is reading oversold then you shouldn’t just automatically start buying. Instead you should take that as an indication that the current move down may soon be coming to an end and to manage your positions accordingly. That is how indicators should be used and if you use them with that mindset then you should have no problem using indicators to profit. Don’t get me wrong I still think you would be better off not using indicators at all, but I realize as traders we all have to find what works for us as individuals. So, if like to use indicators then more power to you, but remember if you going use them then use them right.
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