Technical Trading Indicators

Trading Indicators: Stocks Forex Futures

When you start learning about how to trade the financial markets, whether it be stocks, options, futures or Forex it does not take long before somebody is going to introduce to technical analysis and trading indicators.

This is because trading using technical analysis has become the most popular way of trading in recent years.

Using a momentum trading indicator is one of the most powerful ways that you can significantly improve your trading performance, the reason is that it one of the very few leading indicators.

Most of the signals given by the multitude of trading indicators available today are duplicate, in order to trade really well you only need 3 trading indicators.

Once you know the trend (direction), the cycle (beginning or end) and the strength (momentum) of a move you have all the information needed to trade with confidence and accuracy.

If you want to learn more about these 3 indicators, and learn how to trade like a professional sign up for the:

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One of the most mis-understood aspects of technical trading, that is using trading indicators as opposed to fundamentals, is that it is often thought by beginners and intermediate traders that the more technical indicators that you have on your screen the higher the probability of getting a correct trading signal will be.

One of the secrets of most professional traders is that they use very few technical indicators because they understand that there is no holy grail technical indicator and that by having indicators on your screen only leads to confusion.

The fact is for anything that your are trading there are only 6 pieces of real information, these are:

  • The price
  • The opening price
  • The closing price
  • The high of the day
  • The low of the day
  • Volume

Yet somehow these 6 bits of trading information have lead to over 150 trading indicators!, why is this you should be asking.

The answer is that many trading gurus, coach’s and trainers, searching for the holy grail trading indicator, think that they have come up with a better indicator, which they usually then name after themselves and often make it proprietary and sell it to charting software providers.

If you buy into the trading guru’s trading style and system you then have little option but to  buy their secret indicator, which then leads to a lot of frustration when you finally realize that it is nothing special and was a waste of money.

True trading professionals know that the secret to trading success is:

  • Using a trading strategy that has a reasonable win/loss ratio
  • Using a trading strategy that has a good reward/risk ratio
  • Using good money management
  • Following your trading plan

You see in the above list there is no mention of having a secret holy grail trading indicator!

It does not matter what you trade, stocks, futures, oil, gold, silver, Forex or bonds the same principals apply, to trade successfully you only need about trading indicators max, you need indicators to help you determine some very basic information about the chart that you are looking at, you need to try and determine:

  • The current trend
  • The strenght of the trend
  • Is this the start of end of the trend
  • Are we nearing a top or bottom

The fact is that to determine some of these parameters requires some maths to be performed, on a tick by tick basis, on the 6 real data points described above, which simply cannot of done in the head and that is really the only big advantage of trading indicators and that the the resulting calulations can be displayed in different colors on the charting screen