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Selecting an Indicator

Selecting an Indicator

Richard Krivo, Trading Instructor

Instructor's Response:

I don't think of indicators in terms of beginning level, intermediate and advanced.

Rather, we suggest that you familiarize yourself with all the major indicators and then settle on the one or two that you find to be the most understandable.  Someone else's "ideal" indicator may not appeal to you and that is fine.  Use the one(s) that make the most sense to you and put pips in your account on a regular basis.  After all, pip accumulation is the final arbiter when it comes to evaluating the success of one's trading.

When going through your evaluation process, only put one indicator at a time on your chart.  This will make the chart less cluttered and more straight forward to interpret.  Moreover, it will be easier for you to evaluate the indicators individually as opposed to attmepting an evaluation en masse.

When you finally decide on one or two, remember to consult the chart first and the indicator second.  By that I mean we want to focus on taking trades in the direction of the Daily trend.  The trend is the deciding factor in whether or not we will be buying or selling the pair.  Then, after that decision has been made, we check the indicator.  We are looking to see when the indicator will provide us with an entry signal to trade the pair in the direction of the Daily trend.  Don't simply focus on the indicator to determine whether you buy or sell the pair.  If you do that you will find that you will be entering trades that have a lower probability of success...those that are against trend.

The indicator cannot provide you with the trend but the chart can.  And the chart is where your analysis should begin.

For the record, my personal indicators of choice are the MACD and Slow Stochastics.


 

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