Most indicators of technical analysis (TA) emphasize one aspect of price behavior. All of them use historical price data and provide clues in the form of mathematical relationships that then can be interpreted by traders. Most beginner traders devote too much attention to the use of indicators, sometimes treating them as if they had some magical power.
Nevertheless, all indicators of technical analysis have a particular accuracy for generating trading signals – far less than 100$ accuracy. That is why each trader using technical indicators should: Use a small number of indicators: 3 are enough.
Those indicators should use different methods of processing data – similar indicators will give similar signals and that is why using more of them will be unprofitable. Indicators based on different analysis methods will be often in conflict so in a situation when all of them will show the same signal, it can be a powerful clue to make a trade.
Use trend indicators (i.e. moving averages in order to indicate the main trend direction. Devote a lot of time getting to know indicators: know their weak and strong points and use them in a way so that they compensate one another. Read, analyze and learn.
All pieces of information about the market have their value. Some of them are worth a little bit, some much more – the ability to choose and prioritize information is one of the most important characteristics of successful traders.
The number of indicators is huge. Each day new indicators are created and each day someone creates new way to utilize existing indicators in a new manner. You have to use all indicators with common sense. You have to learn how to use them as they are not magic like Harry Potter’s rod.