By: Charley Warady
There is, contrary to popular belief, such a thing as too much information. If you watch a Forex newbie with his study of Forex technical indicators, you'll see his chart looking like a diagram of the veins in a human body. There will be so many lines drawn and numbers circled, he won't know when to buy, when to sell, and when to step aside.
Less is more
In the field of Forex technical indicators, a predominant belief amongst experienced Forex traders is the concept of 'less is more.' There are many ways to get fancy, and plenty of theories to go around. But most traders who use Forex technical indicators who are very successful in Forex keep it simple. Too many Forex indicators and you won't even know which way is up; or down for that matter.
Most novice Forex traders who do extensive research prior to committing to their first trade start out using lots of Forex technical indicators, or try just about every indicator they have even done the least amount of research. Yet as they become more experienced in trading, and are tired of being confused, they drop most of them and end up watching price action patterns instead.
Ones to watch
Whether using triangles, pull-backs, breakouts, continuation formations, reversal formations, or various other methods of price action patterns, what happens is that the Forex technical analysis chart will have just a few major trend lines, and a few horizontal support/resistance lines. Even when using only major fibonacci ranges, the support/resistance zones will look like they can be handled. Simple pattern setups. These are the keys to the kingdom.
When implementing any form of Forex technical indicators, keep in mind that the normal, everyday, run-of-the-mill Forex trader wants to only day trade. Unless the margin allows it, the charts should be looked at with this important factor in mind. You're looking to trade for each day and to close the day having a flat position.
Keep it simple
Probably the most important indicator is price action alone in combination with the dominant support and resistance zones. These can almost be watched by not drawing any lines at all. The clusters of candlesticks often show more than any Forex technical indicators strategy will be able to tell you.
At the end of the day, it will always go back to the old strategy of 'the trend is your friend,' and all the indicators in the world won't be able to argue with positive results.
Use your demo account to practice and experiment with different Forex technical indicators. There's no need to risk real money when you're trying to get comfortable with a new, or untried system. That's what it's there for. Once you have found the one (or two) that work for you and don't take a maximum amount of effort, switch over to your real account and have at it. You'll see the positive results and it will add to your confidence in Forex trading.