Technical Indicators - Analysis Paralysis

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Too many people make forex trading more complicated than it is supposed to be. They try to plot various technical indicators and think that by plotting heaps of indicators they will be able to make the right trading decision. The common perception that new traders have is that by having multiple indicators on their charts at the same time, a moment will arrive when all the indicators will point in the same direction and that will trigger their buy or sell order and help them make profit. In truth, that moment rarely ever arrives when any combination of various indicators will give a clear signal on when to buy or sell. Instead, plotting too many indicators usually leads to analysis paralysis. This is a situation when a trader gets confused about what trade to place because all the indicators on the chart are pointing in different directions. So instead of helping a trader place a trade it actually confuses him even more.

Trading doesn't require you to clutter your charts with several indicators at the same time. In fact, it is a better idea to minimize the number to indicators that you use because by using too many indicators you are more likely to get conflicting information. This conflict of information will only creation uncertainty and confusion and will prevent a trader from placing his next trade. While using technical indicators it is only necessary for some indicators to be giving a specific signal, all the indicators do not have to be giving the same signal for a trader to place a trade. Trading with indicators can be seen in the same way as if a person needs to go from his house to work and is waiting for the traffic lights to turn green in order to get to work. In such a case the person does not need all the traffic signal of his entire route to be green at the same time, but he only needs some of the traffic lights to be green when he leaves his house. Trading in forex using technical indicators has to be done in a similar manner. A trader should focus on a few indicators to trade. Once price action is being supported by the technical indicators the trader should execute his buy or sell trade.

Using several indicators usually also becomes confusing while trying to analyse charts using multiple time frames. In such cases it doesn't even have to be different indicators giving different signals in different time frames, but there are moments when the same indicator is giving opposite signals across different time frames. There are moments when you can be using the stochastic indicator and it will be showing that it's oversold on the H4 chart, while it is showing that it is overbought on the daily chart. In such cases the higher time frame chart should be kept in mind to determine the overall direction of the trend but the H4 chart will provide a clearer signal one what level to place the trade.

The overall idea of trading with technical indicators is to make sure that the trader doesn't overcomplicate his trading and should keep it as simplified as possible.
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