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The Biggest Problem with Using Indicators

Date: Tuesday, November 28, 2017 5:41 AM EDT

Forex trading is a complex (yet very profitable) market. It requires a deep understanding of what moves and affects how people perceive currency value, what determines price fluctuations, studying tendencies, and many more variables that form what we know today as Forex analysis. And not only the variables can be hard to understand, but the tools can also be tricky. Indicators are commonly considered as abstract and confusing by a lot of people.

That isn't entirely false.

Forex analysis can be obscured by indicators since there are so many options from which you can choose. That makes it easy for beginning traders to get lost in the variety of offers the market presents you.

Since indicators are supposed to be of help for you and not hinder your profit, it's important to analyze where the problem lies: What makes indicators fail so hard for some people?

1. They Don't Give Signals.

A lot of traders make the mistake of letting indicators tell them when to buy or sell.

They wait for a particular point or sign given by the indicator that has been set in their minds to mean "sell" or "buy now".

Indicators don't do this. Indicators are a tool for facilitating information to whoever uses them.

Indicators are divided into two types: lagging and leading.

Lagging indicators show events that already happened. They show you how prices have moved in a specific period. People often use these to know when to buy or sell. That is wrong since they show things that already happened: they might show a price drop, but while you see it, prices could be climbing.

Leading indicators use mathematical formulas and predictions to give an overview of what could happen in the market. That is good since they can give you an idea of a possible future so you can prepare yourself and wait for actual signals.

However, leading indicators are prone to failing. And you shouldn't use them as reliable signs of market changes.

2. They Can be Messy.

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