What Is The Best FX Indicator?

What Is The Best FX Indicator?

Posted on March 28, 2011 Admin

Everybody ponders over the best FX indicator when they can see so many of them listed on their platforms and all of them free to use, precisely the root of all confusions. The misconception among the new starters is that using two or more indicators can lead them to exact predictions and sure-shot profits. It usually so happens that the newbie starts experimenting with many indicators, making a mix of all, hence taking him no-where. Here we will examine your approach and see what you should expect out of your indicator and what the definition of the best FX indicator is.

The role of an indicator is to only show some possibilities as to what can happen in the current scenario. Mind my words that it’s only a ‘possibility’ and never any certainty. No indicator can ever tell you with absolute guarantees as to what will definitely happen. The indicator’s job is to give you the ‘possibilities’ and then its your trading acumen that tells you how to convert these possibilities into profits. This is one major mistake that all new traders make while assuming that whatever is being projected by the use of the indicator is a ‘certainty’ and if two indicators give the same projections, then the movement is a cinch. I will correct your approach by stating that the certainty comes out of your strategies and it comes in the shape of profits, not the market movements.

Having understood that, we need to see which indicator out of all is the best FX indicator. You will not like it but there is nothing called the best FX indicator for the markets, its all personal. You meet the best FX indicator when you find one that matches your personal analysis convenience, your personal trading style and your personal trade timings to the exact degree. What good is Elliot Waves to a day-trader when his temperament does not allow him long-term positions? What good are the Pivot-points to a Swing trader who prefers catching larger moves, longer positions and reversing trades? What good is an hourly indicator to a working professional when his regular job does not allow him time to analyze the markets every one hour?

You see, Your best FX indicator is the one that matches your personal convenience the most. For somebody who does not like the sight of charts will most likely find convenience in fundamental indicators. Fundamentals surely help you keep more organized as all that you need to do is print of a list of daily news and economic events to be released during the day, return to your platform at the time of news and then whatever the news, take your position. For an employed person who takes trading only as side-occupations, there is no better indicator than news, as you really don’t need to monitor the markets all day long.

Similarly, full-time traders find convenience in technical indicators but you need to see what kind of projections they give and what frequency of analysis they demand. While Pivot points are at their best on an hourly-frame but they also demand a lot of calculations all day long. Though it may be the dream-indicator for your fellow trader whose passion is to be in the markets all day and catch every little trade that he can make even for the smallest of profits but you may or may not be the guy who can do it every one hour, so it may or may not make your best FX indicator. Do you get the logic? Let’s cover up a few more.

Channel trading and Trend lines are at their best for range-trading strategies but how would you feel if you were to simply draw the ranges and then keep your eyes fixed on the screen all day long for the range to come? Will all this be worth it if that trade coincidentally ended in a loss?

Same way, Fibonacci series calls for moving with the trend as soon as the resistance level is broken but, can you really afford to sit on a position that could last from one hour to even a month?

These are the questions you need to ask yourself before deciding on your indicator. All indicators give you a lot of aid in decision-making but first you need to decide what kind of trading-style you would like to adopt, how long a position you intend to hold, how frequently you can analyze the markets and finally how big a move you wish to catch. It’s only after finding these answers that you examine which indicator it is that matches all your requirements and that’s how you reach your true trading friend, your personal best FX indicator.

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This entry was posted in Forex Terms, Forex Trading Tips, FX Indicators, and tagged Best Forex Indicator. Bookmark the permalink

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