I am on my way to create a strategy for my trading plan. I was thinking that I’d want to set clear rules for entering or exiting a market, let’s say I use the Bollinger Bands and the Relative Strength Index to enter the market, but what would I do with all the other technical analysis I can do using trendlines, fibo, patterns, etc.
Or for example, when I see or heard some market analyst talking about his analysis and what he thinks the market will do, they don’t talk about a specific rule, so how they integrate that kind of analysis into a strategy?
I’d like to get comments on how to integrate a broad analysis into a specific strategy from people who is already trading a strategy.
More does not always mean better. Just because there are 20+ indicators available on a chart doesn’t mean that you have to use all of them.
It’s important to learn about the different tools you can use, pick the ones you want to use, and then create your strategy based on it.
Many traders will often times use multiple indicators for confirmation, or use one to indicate the trend and then the other to enter the market, etc. It all depends on what you find to work best. Hope that helps with starting at least.
I am not really talking about indicators only, but tools that are simple and easy to understand what they do, like trendlines or fibonacci.
I already know more tools that I would use for a strategy, so my question is if I create a simple strategy with only a few tools to trigger signals, should I stay away from any other kind of analysis to avoid this to influence my strategy?
Or maybe I should develop more than 1 strategy so I will use all my favorite tools.
As I said before, the analysts you see on tv or online, they show tons of different analysis and I don’t think they always talk from the point of view of their own strategy. So why would they analyze the market with tools that are outside their strategy?
After you master each one of them. Combine them into your chart and study it all at once. You will master the entire forex market including the mathematics of moving average, volumes, and at the end of your study you will realize the forex market is really dangerous and unpredictable. You know that!!
There’s no magic bullet for this question in my opinion, but for my own trading I can answer yes. I started out using additional indicators such as moving averages, momentum, and macd, but I didn’t do as well. I didn’t like making trades dependent on lagging information (technical indicators) when I could look at current price action. Here’s a thread I just created where I’m posting my analysis if you want to view http://forums.babypips.com/eurjpy/26683-aud-jpy.html#post121981
I use fibonacci’s, support/resistance, trendlines, and then watch fundamentals to support my tech reasoning for the trade.
technical indicators are nothing more than a history lesson in my opinion, they dont have as much relevance today as they did yesterday whereas price action and tools such as trendlines and fibo focus on the here and now which is the key to understanding the forex market
I think you are mistaken that history lesson is as important and relevant even of today and tomorrow. Look at the chart history frequently repeat itself and it happens most of the time. Never omit the history out of your analysis
history plays a part in my analysis through previous support and resistance but as for technical indicators they are simply a way of relaying the exact same information that any trader with a reasonable amount of knowledge in the forex market can see with his own two eyes, why complicate your charts with all these squiggly lines as they are refered to instead of focusing on the most important aspect of it which is PRICE
by all means if you want to base all your trading decisions on moving averages, MACD and whatever else instead of paying attention to the actual price movement of the market, be my guest and i wish you as i do everyone the best of luck
but i would strongly urge you and anyone else to steer away from the stereotype that a trading strategy comprised of strict rules ie when a crosses b and is in accordance with c and d that you should go long or short will bring you long term profit and instead focus on the raw material of the market which is price and how it reacts to certain levels ie support and resistance
I am not saying that price action is not important either. In fact i rely a lot on it when trading. I am just referring to your opinion “they dont have as much relevance today”
The main topic of the thread wasn’t which tools to use, but how to “apply” a strategy…
I am thinking about developing a strategy using simple pivot points and candlesticks (maybe an oscilator too). So I don’t know what I will do with all the other analysis I could do on a chart, I think I could use fibonacci, trendlines or other tools for confirming levels (like a support or resistance), but I wouldn’t use them for signals, just to confirm price levels.
what do you guys think? would it be better to have a strict set of rules for entering/exiting the market [B]OR[/B] having different combination of tools/methods to do it?
and frontier i understand your view, i am not totally disregarding history i was just trying to stress the point that it should not be relied on as much as it is as alot of uneducated traders feel they can learn a “trading strategy” based on historic results and they will be successful simply because they learned it from another successful trader without actually attempting to learn the concepts of the market and get a feel for price action, which most of us know by now inevitably leads to failure.
in my opinion i dont believe in having a strict set of rules when it comes to trading, the market is very dynamic and as traders looking to profit from that we need to constantly adapt to it using all the tools, knowledge and experience we have gathered throughout our trading careers.
there isnt an indicator in the world that can outperform a seasoned traders experience and knowledge, this can only be achieved in time and with a great deal of determination and perserverance but once achived reading price action will be as easy as reading the london tube map…
