Using Various Technical Indicators Effectively for Optimal Benefits: Part II

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As discussed in part I, many Forex traders use technical indicators to help them identify probability of trade entry as well as exit points. We discussed different types of indicators and how to trade effectively using multiple indicators. In this article, we are going to look at other aspects of trading effectively using technical indicators.

 

Keep the Trading Charts Clean

 

Trading charts should be used to enhance your trading in the Forex market and not hinder it. To achieve this, you should keep the trading chart clean to ease market analysis. The charts should be easy to read so that you can rapidly decipher and respond to Forex market activity. Customize the charts so that they can serve your interests in an effective and an efficient way. All in all, have clean charts and workspaces that will enable you to trade effectively in the currency market using technical indicators.

 

Avoid Information Overload

Information overload happens when as a trader you attempt to interpret a lot of data at once. When you have too much information you are analyzing at the same then you will be unable to respond accordingly. It is recommended that you should avoid information by eliminating extraneous indicators from your workspace. This will help to cut down on cluttering. Also, you should try as much as possible not to use same types of indicators on the same chart; just use complementary indicators for effective results in your trading. It is worth noting that as a trader you should change indicators you use from time to time as market conditions changes. The strategies that you employ in trading in the currency market as well as trading style also determine the technical indicators to use.

 

Input Variables

 

Different indicators allow customization by changing input values. Variables like look back period as well as the type of price data used in calculations can be altered to give an indicator various values and help to point different market conditions. Enter a range for a specified input like moving average length and the trading platform will work the calculations to get the input that creates favorable results. Multivariable optimizations help traders to analyze 2 or more inputs simultaneously to determine what combination of variables that will lead to good results. Optimization is thus important in helping traders in identifying the most profitable variables.

It is good to note that optimization is great but over-optimizing can make theoretical results look amazing but in real sense live trading is suffering. Understand and utilize appropriate forward testing and back testing techniques as part of an overall strategy development process.

As a trader in the Forex market, you should know that technical analysis deals in probabilities and not certainties. There is no combination of technical indicators that can accurately predict the currency market moves a 100 %. While usage of many indicators at once or incorrect usage of technical indicators can blur a trader’s view of the currency market, Forex traders who utilize technical indicators effectively and carefully in their trading increases their odds of making substantial amount of money in the Forex market.

In conclusion, simple moving average indicators are very good in the Forex market especially when used with trend lines. They help you to spot and stay with the trends in the market as well as pick areas of value to buy into. For good results, you should use moving averages for long term trends only since they are not beneficial in swing trading or Forex scalping. It is worth noting that these indicators should be used with other complimentary technical indicators for optimal benefits. Take time and utilize the trading tools on your platform to make the best out of trading in currencies.