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Forex Trading - Can You Use Too Many Technical Indicators

By: James Woolley

The majority of people who trade forex use technical analysis to make their trading decisions. They generally use a wide variety of the hundreds of technical indicators available at their disposal, but how many should you use if you want to be a profitable forex trader, and can you use too many?

There's no question that the internet, and the subsequent ease of access to technical charts and indicators, has led to more and more traders being able to learn and become accomplished at using technical analysis to help them make trading decisions.

Indeed, people will spend hours on end experimenting with numerous different technical indicators in order to find that holy grail combination that will help them to become rich from trading the forex markets.

However no combination will prove to be 100% successful. The key is to find a combination that suits your trading style, and enables you to make high probability trades that will give you a positive equity curve (ie profits) in the long run.

If you have a sound stop loss policy and a rigid and disciplined trading system based on certain indicators, then you can make a good income from forex trading.

You don't need to use several indicators at once. Indeed many top traders argue that you should minimise the number that you use, simply because the more you use, the more you will get conflicting information, and confusion and uncertainty does not equate to profits.

For instance you may use six different indicators to help you make your entry and exit positions, but you may, for example, have four of them indicating an oversold position and telling you to enter a long position, but the other two are crossing downwards and indicating a forthcoming downwards movement, so in this case you would probably abandon the initial long trade you were going to make.

This is further complicated when you use multiple time frames because this becomes even more of an issue. Multiple indicators over different time frames will invariably give you conflicting information and the net result will be that you end up not trading at all, and essentially always being afraid to take a position.

This is why so many top traders recommend using just a few tried and tested indicators. You don't need to have a really complex set-up to be successful. You can make a decent living from forex by just sticking to a few basic indicators like RSI, stochastics and MACD, or just using support and resistance levels to make trading decisions.

Furthermore, some traders, like Avi Frister for example, only use one indicator, and argue that it's the only one you really need - price.

So if you're striving to become a profitable trader, don't overcomplicate things. You can be just as successful using just a few simple indicators than constantly trying out the latest and greatest new indicators in order to find that elusive winning combination.

To read more about Avi Frister http://theforexarticles.com/forex-trading-machine-review/

Quick Forex Ideas

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Ebb and flow of capital between nations, otherwise known as Purchasing Power Parity (PPP) is the central factor that determines market momentum. In addition, fundamental economic forces such as inflation and interest rates are constantly influencing currency prices. Faith in a government�s ability to stand behind its currency will also impact currency price. This is done in two ways: controls and intervention. Controls restrict citizens from doing things, which have a negative effect on the exchange rate (such as sending money abroad). Intervention takes two forms: changing the interest rate on the currency to make it more or less attractive to foreigners, or buying/selling the currency to raise or lower its market value.

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Currency prices are affected by a variety of economic and political conditions. The beginner trading forex currency should take note to probably the most important influences to the currency prices are interest rates, international trade, inflation, and political stability. Governments participate in the foreign exchange market to influence the value of their currencies. The governments flood the market with their domestic currency in an attempt to lower the currency price or conversely, buying in order to raise the price. This is generally known as central bank intervention. The beginner trading forex currency should be aware that large market orders can cause high volatility in currency prices. Due to the size and volume of the forex market its impossible for any entity to drive the market for any length of time.

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Forex fx currency symbols are always three letters, where the first two letters identify the name of the currency and the third letter identifies the name of the country's currency.

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First what is Forex: The FOREX or Foreign Exchange market is the largest financial market in the world, with an volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another.
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