It’s a question we get asked a lot. And it’s no wonder, as there are more than 100 different technical indicators available to use when it comes to trading. There’s the stochastic, the MACD, Bollinger Bands, the ADX… and a whole host of others.
But their primary reason for being is to help you time your entries and exits of trades.
Here’s a quick explanation of the above technical indicators
• The Stochastic oscillator tells you when the stock you’re trading is overbought or oversold.
• MACD is the Moving average convergence divergance. It’s one of the simplest and most effective momentum indicators available.
• Bollinger Bands signal the stock is overbought or oversold using bands that track the stock. The upper band signals overbought and the lower band signals oversold.
• ADX is the Average directional index. This indicator measures the trend strength. Values between 0-25 show is no trend or weak trend, 25-50 signals a strong trend 50-75 shows the trend is very strong and 75-100 signals an extremely strong trend.
With so many indicators competing for your attention, it’s easy to see how new traders get confused when they’re starting out and it’s easy to slip into one of two camps…
New traders tend to fit into one of two camps regarding indicators
The first group are those who are always looking for that one killer indicator… the one chart that could yield winning trades every time.
Sadly, there’s no such thing as that one killer indicator. It simply doesn’t exist. Having said that, as you develop as a trader, you will develop some favourite indicators. IN fact, there are three key patterns or indicators, I use more often than not for Pattern Profit Alerts, which if you’ve been following me, you will know we have a 100% win rate since April 11th when I joined the team. You can learn more about three of my favourite patterns here.
Now let’s get back to the second camp… this is where analysis paralysis comes in.
These traders like to use every indicator under the sun. And this approach is a sure-fire path to failure.
Your trading could become so complicated, with so many conditions, that you might never work out if there’s actually a trade worth taking.
So what’s the best use for trading indicators?
Use patterns to give you information about what’s happening with a particular share in the market
With Pattern Profit Alerts I tend to use two to three patterns/indicators to find my trade ideas. That way, things stay simple and clear.
Some of my of my favourite indicators are Momentum indicators, including the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and Stochastic Oscillator. I look for breakouts and trend reversals using indicators like this.
Test your ideas and see how your trades pan out, build your experience with these indicators and that way you can develop a winning trading strategy.
If you want to get trading but need help getting started then follow my Pattern Profit Alerts. Not only will you learn a lot more about which indicators to use, you can also start making some profits from your trading starting today. Just go here to take a 90 day trial.
