Friday, November 24, 2017

How To Limit The Number of Indicators In Trading

June 12, 2013 by  
Filed under Forex FAQ & Latest Post

In today forex faq, we have a question from one of our fellow traders regarding the usage of indicator for his trading.

Below is the question:

I am overwhelmed by the number of indicators available on my trading platform. To simplify trading I am looking for only 2 indicators i.e macd and candlesticks.

Can you help?

Thanks

Indeed there are too many indicators available in our trading platform and it is impossible for anyone to use all of them in their trading. Therefore it is very important for you to know which indicators you actually need to use.

I personally never used more than 3 indicators in any one of my strategies. If you are student of any one of my course, you will see that I used at most 3 indicators in a strategy. The problem with too many indicators is you will find it very hard to get into a trade and worst of all doesn’t make the trade more accurate.

So the key to selecting indicators lies in your understanding of their usage as well as your trading strategy. As I do not know what strategy you are using, I am unable to give you any suggestion on which indicators to use.

However there are a few of them that can be used in most situation and they are MACD, Fibonacci and the Stochastic indicators. What I suggest you to do is to try them out on your strategy and do a back test to see if they work well with your trading plan.

Whenever I am formulating a new strategy, I will always test out different sets of indicators and then do a back testing to see if they are able to produce consistent profit for me every single month for at least 2 years.

I will do a switch and swop for each indicator and then fine tune their performance by adjusting their settings. Formulating one reliable strategy is not easy but it is definitely worth every second of my time as it will eventually make money for me for a long time.

In the case if you find it too hard to select the indicators or formulate a strategy, what I can suggest you is to take up any course that teaches you reliable strategy as it will come with a set of tested indicators to use.

Bear this in mind, you must always practice the strategy that you have learned in a demo account until you are able to make consistent profit in your demo account before you switch to live trading.
Therefore I hope that I have answered your question and do feel free to give your comment below if you have any further doubts.

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