Should you use indicators?

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When I first started trading, there were much fewer indicators available within my charting software. MACD, RSI, Bollinger and a couple of others and that was about it. Nowadays it’s a different story. There are a great many more indicators plus of course the EA’s that are in ample supply in MT4.

Do we need all these indicators in order to be successful? Are they really the holy grail we are led to believe?

There’s a strong argument that all you need as a technical trader is a price chart and the ability to draw support/resistance and trend-lines. It certainly keeps your charts cleaner and at its core it encourages traders to look at the most important indicator of all; price. Do we really need indicators to tell us what’s already there within the price action? Remember indicator building is a good source of income for the people that create them…

However there is another factor at play here which gives a strong counter argument for why many traders should use indicators. As traders, we are all constantly striving to be able to trade within our own comfort zone. What is comfortable for one trader won’t be for another and that’s what makes the markets so unique – we are all different.

For one person, adding a couple of indicators to a chart would bring little value whatsoever as they are comfortable just looking at price. But for another trader, it can make the difference between trading and not trading at all. I was chatting to a futures trader who relies heavily on seeing the order flow and says they couldn’t possibly trade without it. After a long conversation, that trader confessed that it probably didn’t give them any more of an edge than using a simple indicator because there are times when the book is manipulated to such an extent that they just get chopped. However, the trader has become comfortable with using the order book and therefore believes in its value.

Ultimately then, using indicators is more about our mindset than anything else. If using them gives a trader confidence in what they are doing, that’s much more important than any inherent defects with the indicator itself. I’m a huge believer that what makes a trader successful is much more than the technique they’re using. It’s the confidence they have to trade with that technique that makes them successful or not. So, if you want to use indicators they will have a lot of value for you because that’s what your mindset needs. If you don’t want them, they would hold no value at all….

Moving over to the markets, the AUDUSD has a rising trendline below price currently so we are either going to see that hold as support or a technical break. If it holds as support, look for a breakout of the 77.50 area for confirmation of another upside leg, if that trendline breaks, look for a test of the September lows…

Have a great week

Charlie Burton

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***Meet Charlie***  Attend Charlie’s live seminar this Saturday in London at 3pm at Round-the-Clock-Trader LIVE! at the Grand Connaught Rooms near Covent Garden – His seminar starts at 3pm, but doors open at 8.30am for the 31 other seminars going on – use code RTC001 for your free ticket – http://www,roundtheclocktrader.live