“Which is the best technical indicator I can use when trading Forex?”
This is a question, I get asked at least once a month!
There are a deluge of different technical indicators to choose from, which can help you towards your Forex trading success.
You get traders that recommend indicators like the Stochastic, The MACD, Bollinger Bands, the ADX, blah blah!
Don’t worry about any of these jargon terms, because you don’t need them to make money in the Forex market!
Many traders try to incorporate over three or four of the above indicators and try to develop the perfect strategy, and I have a HUGE problem with this!
Let me explain…
Amateur Forex traders are trying to find a sure-fire indicator that will always win!
Most Forex traders start-off by learning how to use these indicators.
But what they don’t do is, take the necessary time to learn the meaning of each one.
They all try to find that sure-fire indicator which will bring them only winning trades and 100% success rate.
Well let me tell you this.
In a $5 trillion a day industry, I can promise you now, NO ONE can ever predict the market with exact certainty, especially with the Forex market.
Every “killer” indicator is history!
This is probably the most important factor you must consider, when you choose to develop a Forex strategy.
No matter what “killer” indicator you choose, they are all based on historical data.
I honestly cannot think of one indicator in this world that has any form of predictive qualities, and if you find one, please let me know…
How on earth, can we ever predict where the EUR/USD will be going when millions of traders are buying and selling the currency pair at any one time?
Not only that, but there are countless economic, political and socio factors you have to consider, with any one currency pair.
Let’s say, that we had a miraculous computer that takes in every factor that causes the currency pair to move.
Well even with every factor and strip of data your computer has assimilated, it’s still based on historical data!
So if you can’t predict the Forex market with an indicator, what can you do to make money?
When I make any Forex trading decision, I solely depend on one thing…
If I see the EUR/USD is going up and has been going up, then I’d rather follow the direction of the trend rather than trying to predict a turn.
The probability that the EUR/USD will continue to go up is higher than the probability of it turning down.