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How Many Indicators to Use?

April 9, 2012 by

One the one hand, price action traders prefer not to use any Forex indicators at all. It is a common belief among them that the technical indicators don’t add any new information to the one presented by the prices themselves and just clutter the charts, obscuring the real market data. But that’s only one group of currency traders, and it is quite small.

On the other hand, among technical traders, it is almost conventional to use at least two indicators on a chart: one trend indicator (for example, some kind of moving average) and one oscillator (for example, RSI). Such setup allows buying low and selling high in the direction of the main uptrend, and is recommended in many financial trading books.

Lastly, there’s a group of Forex traders who add a lot of indicators to their charts — 5–6 or even more. This group of speculators usually consists either of newbies, who don’t quite understand what they are doing and add too many indicators thinking that it will help them somehow, or of the highly professional specialists with sophisticated trading systems, which really require such an abundance of the on-chart data.

Personally, I don’t have any indicators at all on the majority of my charts. From time to time, I might add one or two indicators to the charts I research to see what other traders see on these charts, but I rarely base my trades on the indicator display. How about you?

How many technical indicators do you use on one chart?

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If you wish to share detailed opinion about an optimal amount of technical indicators on one Forex chart, please feel free to do so using the form below.

4 Responses to “How Many Indicators to Use?”

  1. zieman

    I think using 8 indicators could give quite a perfect result. I use 2 indicators for reversal signals, nonlag moving average as price movement, buy/sell signal as beginning signals,BB Stops to confirm starting trend,1 indicator to check trend continuation, 2 indicators to check price movements and levels and also I use the two reversal indicators that I have mentioned earlier to stop and take profits.

    Reply

    admin Reply:

    Glad that it works for you!. I would just like to remind you that adding more dependent indicators (like more than 1 moving average) to your system just adds lag without providing any additional reliability.

    Reply

  2. Alexander Collins

    I’m used to trading with ProFx (set of 10 indicators) can be counted as semi-automated EA and Fx Pulse (trend detector and news feeder indicator.)

    Reply

    admin Reply:

    10 indicators in semi-automated mode are easier to follow than in manual mode :-). I’d hate to look through such chart.

    Reply

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