Forex Indicators

I have always had a preference for price action analysis over Forex indicators.  However, I use indicators occasionally to confirm my bias obtained from price action analysis.  The mistakes most beginners make are assuming that there is a magic Forex indicator that can replace the “leg work” of price action analysis.  They assume that the formula will make trading easier.  The reason beginners fall into this trap is because of the fancy marketers who promote get- rich-quick, pie-in-the-sky, over-hyped, super Forex indicators.  Do not fall for the illusion of Forex indicators.

An indicator is a visual representation of a mathematical formula based on change in price and volume of a security.  There are hundreds if not thousands of Forex indicators out there, claiming to be the Holy Grail. Hey! Newsflash! It does not exist.  If it does, it will not be for sale on the market.  Remember derivatives in high school calculus? A derivative represents change of one variable with respect to another.  Indicators are a derivative of price action with respect to time.  Therefore, price action must happen before the indicator can reflect it.  In other words, you cannot measure change until it happens.  But, as traders, we profit from the change, so trading change that has happened is totally useless to us.  This means that every trade based on indicators will get you into the trade too late majority of the time.  You will be trading sub-optimally.    It is better to use as a confirmation of price action, as supposed to using as it as a predictor.

My recommendation is to start with one or two moving averages.  Otherwise, the illusion of Forex indicators will have you more confused than ever.  There are so many variations, but a good place to start is the 50 exponential and the 200 exponential moving averages.  When the 50 is beneath the 200 EMA, the trend should be bearish, and when the 50 EMA is above the EMA, the trend should be bullish.  Notice I say “should”.  These are not arbitrary numbers.  Majority of the market analysts use these numbers as an overall picture of price action.  If you follow my trend analysis method (discussed thoroughly in the course), you will be ahead the pack and you will see how much Forex indicators tend to lag true price action analysis.

Gregory King

Gregory King a foreign currency trader, Fund Manager, and math aficionado. “My cardinal tenet will always be "Keep Trading Simple." I sincerely believe, that in the long run, the market can be exploitable in a few situations if one has the forbearance to stick to the simple fundamentals. Overtrading is the main detriment for the demise of majority of trading careers.
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