Although most of my trading articles cover price action, resulting structure and discretionary trading, I understand that many traders simply can’t process that type of information through a clear filter and will rely on some type of trading indicator.
There are so many biases that affect our trading and it does take a long time to be able to get a handle on them.
Actually, many people who enter this business never will get a handle on them which will keep trading rewards far from their hands.
I think that is one reason that anything that has subjectivity involved can be the demise of many traders.
Trading Indicator for Simplicity
When I started trading, I had a tendency to over think many things. “If in doubt think it out” was something I strongly adhered to but in the end, it simply caused me to see things that were not truly there.
You have probably heard the saying “trade what you see, not what you think“. It contains a lot of truth and I would add the following to it:
“Trade what you can EASILY see….not what you think”.
That simply means that if “X” does not pop out at me, move on to something else. Sometimes the use of a trading indicator or two can help you actually bring simple to your trading especially for the “over thinkers” amongst us.
This chart here, when I started trading, I’d probably would have said this was a market in an uptrend due to the move on the left.
I would then attempt to buy into the pullbacks to get involved in what I thought was the overall trend.
You can see by the blue arrows that my longs would not have seen much in the way of profits. I may have even added to the second position when the third pullback occurred.
Trading What I Think
I would have taken a loss because the filter I was looking through was not clear. I would be so caught up in making huge profits trading the trend that I thought was in play, that I missed some obvious events.
- The trend was weak!
- Doji candles.
- Upper shadows.
- The pullback off the top was strong.
Was that it?
- There was also hidden pullback on a lower time frame chart shown by the first green candle after the high.
- Weak pullback showing very little buying pressure.
- Huge bear candle.
Price fails to make a higher high and effectively becomes a consolidated structure. This should clue me into scaling off some position or simply close the position until this structure resolves.
What I should not be thinking is to position myself into a long trade while in consolidation.
That said, there are ways to position yourself for a probable directional move out of the range but not only is that beyond the scope of this topic, it can be highly directional.
Trend Was In Trouble
If I would have easily understood that the trend was in trouble (it does turn into a full scale reversal), I could have saved losses and the commission costs of trading. Not only that, it could have allowed me to take advantage of setups on the lower time frame because I understood the state of the higher time frame.
Trading with a solid trend can only help you in your trading journey. Often times the market can give you conflicting signs and if you guess wrong, it can cost you money. Attempting to trade in a choppy market state should only be undertaken by skilled traders.
Having an unbiased and objective opinion on the trend and current market state can be considered Step 1 in finding good trades and sometimes a trading indicator is called for.
Take a look at this chart.
This is a weekly Forex chart giving you an objective determination of trend. You can see where, on the lower time frames such as Daily, you would switch gears and look for appropriate entries according to your trade plan.
It takes all subjectivity and personal bias out of the equation and tells you: Trade in the appropriate direction.
If you trade many currency pairs especially using the four hour time frame, it can be time consuming switching from the trend chart to the setup chart.
This indicator on the bottom actually shows you the weekly trend while looking at the four hour chart. You can clearly see where you would switch from a long bias to a short bias.
If you saw the indicator switching back and forth between colors too often, you could quickly determine the market is not in the best trading condition and sit aside.
Soon after the indicator tells you objectively to take short trades as shown in the above chart, we have a complex pullback using A to B = C to D and then a reversal set up to get you into the play.
A quick glance at the chart showed what direction the higher probability trades are in. To a vast number of traders, this is the type of trading indicator they need to keep them on the right side of the market and away from guesswork and knee jerk trading.
Netpicks has decided that instead of selling this trading indicator, we could help more traders have a fighting chance of surviving the crucial first few months (for some, years) by simply giving it away.
No strings. Nothing to pay. Just enter your email and download the indicator. You will also have access to complete installation instructions including training videos so you can get maximum use of this outstanding trading tool.