Are you unsure, and ask how to trade Forex with indicators? How many times have you lost a trade because you was using Forex indicators? If you’re losing because of indicators you’re in the right place!
You should not trade Forex with indicators, because indicators are just too slow to use in live market conditions, causing you to never capture winning trades. They also clutter your charts making it hard to see what’s really happening. Analysis done using Forex indicators can change in seconds and cause you to lose profits, and can be known as a lazy mans way of trading.
Lets cover in more detail the top 4 Potential hazards with how to trade Forex with indicators, or should I say without indicators! that cause you to pull your hair out!
What I will cover in today’s trading lesson with how to trade Forex with indicators-
- How using Forex indicators are too slow for you ever to capture those winning trades.
- Why Indicators just clutter your charts and make you unable to actually see what’s really happening.
- Any analysis you do using Forex indicators can change and cause you to lose profits.
- Why indicators are a lazy man’s way of trading.
I’ve been exactly where you are today, back when I started trading I too used to use Forex indicators to trade with. It took me some time to realise that using indicators was like actually burning my profits!
The biggest problem traders face today is not actually knowing how to trade Forex with indicators properly with their trading. Read this lesson to the end, and find out the one indicator you can use today and make profits with it!
Now, if you’re not using indicators correctly it’s going to be burning your profits too.
In today’s trading lesson I’m going to provide you with the same steps I took from moving from how to trade Forex with indicators to using price action instead.
Moving To Price Action
If you are new to Forex trading, then you will probably have seen all the advertisements on the web. Trying to sell the next shiny indicator based strategy. These sharks or should I say internet marketers, know exactly what they are doing by playing on your emotions with trying to sell you something that they love to sell.
Unfortunately…These internet marketers are very clever when it comes to writing things down on the web. They will show you with their words of wisdom and using chart examples, of how the indicator is the best on the planet! They know exactly how to play on your emotions when it comes to trading the markets. At the end of the day they are just stealing your money.
With: Prices that can range from anywhere between 40 to 60 to even $90 at a time. Most of these indicator based strategies will be on how to buy here, and sell here in the market. As a Forex Trader you need to learn the skills or should I say your Forex trading education to become successful in this industry.
I will discuss later on exactly how you can go from how to trade Forex with indicators to trading with just price on the chart, and why this will turn your trading around just as it did for me.
But for now, let’s crack on with how to trade Forex with indicators and why I now avoid using Forex indicators with my trading.
1. How using Forex indicators are too slow for you ever to capture those winning trades
Right, you must have used Forex indicators in the past…
Where you was watching on your chart for an entry to take a trade.
But… by the time you actually see the entry to capture that winning trade. It was just too late because the indicator was showing the entry after the move.
Has this actually happened to you?
Take a look at the chart I have posted above, see how the MACD signal line is moving at a snail pace lagging behind price! Reason this snail pace happens is because of what they class as the indicator lagging behind.
What do I mean by that?
Well…I did some research myself when I was using indicators, and realised that price is what actually moves on the chart, not the indicators!
Now: price is moved by traders across the world, and that is moved by their emotions with trading.
So why do you in fact need to even use Forex indicators at all?
The answer is simple.. you don’t, in fact the answer is staring you in the face. With actually trading just the price on the chart. Why not read this recent article I wrote all about the use of technical indicators and price, and see why I removed those indicators off my charts by clicking here.
But more on that later on…
So in this lesson I am going to cover many different options with how to trade Forex with indicators and the Forex indicators you might be using to trade the market, that lag behind price.
There are many different indicators you could use with your trading: such as I have already shown with the MACD above. All of them, will lag dramatically behind price, and will cause you to enter trades after the move has been made.
In other words: You will take buys and sell trades at the end of the move, than buying or selling from the beginning of the move. This is where you are eventually going to blow your trading account, and unfortunately where most new retail traders find themselves when trading with indicators.
Let me show you with some examples why you need to change to trading just price action.
One of the most commonly used how to trade Forex with indicators that new traders use is the moving average cross over.
Why is this the worst?
When using the moving average cross over, by the time the cross over occurs, the trade has already caught the train, or… it’s left the building. You get the picture! It’s just too late to enter the trade using a moving average cross over.
See the examples below of the same chart, with showing a 20 & 50 moving average cross over. Plus, also a price action trade for a entry.
Below is taking the entry using a price action entry…
It doesn’t take a genius to see which type of entry is going to work the best!
Another one of the Forex indicators that many new traders use is the Stochastic.
Many traders see this indicator as a way to catch moves from the very start of the move. In fact… this couldn’t be further away from the truth! But, more on why that is, later on…
So, how does the Stochastic lag behind price and cause you to miss the move compared to a price action entry. With the Stochastic, you are supposed to wait for the two lines to cross over just like the moving average cross over.
Are you seeing a pattern here?
It’s another cross over for the entry! There is also an area which is referred to as the overbought and the oversold area within the Stochastic. This is taught to be the placement, where you would look for the crossover entry.
I will go into more detail on that subject later on with how to trade Forex with indicators and how using indicators for your analysis can change and cause you too lose profits.
Using that area isn’t going to change the fact, this indicator is still lagging behind price! Now, there will be times you can use the Stochastic to catch trades even with the cross over. But the losers will out due any winners you might capture using this as a strategy. Lets, now see an example of using the standard indicator settings of the Stochastic of a 5-3-3 and a price action trade for an entry.
Now lets look at a example of this same setup with using a price action entry.
Forex indicators lose again!
As you will have seen, trying to capture this buy trade on the GBPUSD pair, using the Stochastic the move has already happened.
Using just a price action for the entry, with combining market structure and the trend line. You would have caught this entry right before the large move even happened. So, when it comes to how to trade Forex with indicators, just remember this: that they all lag behind price. Not to mention, they get in the way of you seeing what’s really happening on the charts.
2. Indicators clutter your charts
Forex indicators just makes everything a mess!
Another problem you will find with using Forex indicators, is going to be how they clutter your charts.
What do I mean?
Think about it… when you add these indicators onto your charts, how many do you actually use? One, two, three or even ten. It doesn’t really matter, because the more you add the more clutter you are adding, and preventing you from seeing what’s really happening with price.
Imagine this for a second… you are driving down the motor way, it starts to rain heavily, you know how bad it can get especially when stuck behind a lorry with the water spray!
Now Imagine your wipers stop working…
What, or how much can you then really see?
Nothing! It’s just a blur. And, that’s what it’s like when you need to read price or see how it’s moving on your charts. When you continue to add too many Forex indicators.
As well as that, another problem with how to trade Forex with indicators will cause you. Is to see setups with just the indicators than reading price signals.
Again, with them cluttering your charts, you tend to then just read the indicators and nothing else.
Guess what then happens?
You are just trading and making all of your decisions on lagging indicators. Which ends up with you making loss after loss and heart broken again. So I suggest, to either remove all of those indicators from your charts. Or, at least try to only use one or two maximum, until you are confident to lose them all together.
That brings me onto the next problem with how to trade Forex with indicators. With how using them to make your trading decisions can change and cause you to lose profits.
3. Any analysis you do using Forex indicators can change and cause you to lose profits
Just like how these Forex indicators will lag behind price, they can also change after an entry and cause you to lose profits.
Forex indicators that can cause you to lose profits
Lets look at these indicators, with the Stochastic and Bollinger Bands.
So… what do these two indicators have in common, well.. basically they show turning points in the market. But, the problem with trying to use them in this way, is they lag behind price and can change their appearance after an entry has been taken.
One of the biggest issues traders fail to realise, is they are always trying to find turning points in the market, and with how to trade Forex with indicators. This in itself is going to set you up to fail in the market. Because, what you should actually be doing, is trying to sell high and buy low when you’re trading Forex.
Unfortunately using Forex indicators….
You are led to believe when there’s an oversold area within Bollinger bands or oversold area within a stochastic, these are great areas for you to take a buy trade.
But… one thing I’ve come to realise with Trading Forex, price on the chart can continue going up or down even at these oversold or overbought areas. So why on earth, would you use these indicators to show you this oversold/overbought conditions.
Now that is a great question?
You’ve been led to believe that the using these indicators you will be able to find turning points in the market, and profit from these turning points.
If you’ve been using Forex indicators for any length of time. You may have come to realise these are when you actually have the most losing trades, trying to pick these tops and bottoms. In fact, go back and look over your trades that you’ve taken using any of these indicators I’ve just noted above.
And… see if you have taken a trade, at this point when they’ve been oversold or overbought in the market. To just find price continues, to move in line with the same direction.
You don’t believe me?
Take a look!
OK, so back to using these two indicators, now I’m not totally against using all indicators but these two indicators are some of the worst I believe you could use for trading the market.
Let me explain why…
So when you’re using Bollinger bands, they will show you where price finds a resistance and a support. Or more known as a dynamic area of resistance and support in the market.
You’ll also find a centre line within the Bollinger bands, and this will be based off the 20 SMA. With the outer bands, which are classed as 2 deviations. What you are led to believe is when price spikes or breaks out of the upper band, you’re going to be looking to sell that market. But as I suggested earlier on many occasions, you’re gonna see price continue up with the same direction.
In fact, every time you try and sell off that top, you end up losing money. Now, there’s one thing you can take away from this trading lesson, is the power of learning to use candlesticks. Because if you actually had a reversal candlestick while outside of those Bollinger bands. Then you would have had a better reason to take a sell trade.
So why don’t we use Bollinger bands with candlesticks to make profits?
Don’t get me wrong… there are a lot of traders who already use Bollinger bands with candlesticks and they are successful.
Long-term potentially you can lose more money than you make. This brings me to why you shouldn’t use Bollinger Bands to trade with.
Because…after you have taken an entry, if price does continue into the same direction the bands will move as price does. Therefore, giving you a different image of what there was when you actually took the trade you entered. Now, there will also be times it could work out in your favour. But, once again long term you will end up with more losing trades than winners.
Not sure what I mean then see the chart below…
The same goes for the Stochastic, which has an oversold and overbought area as well. And… you’re also led to believe, you should take buys when the stochastic is below turning up at the oversold area. Plus, you should look to sell the market if it’s at the overbought area and turning down from above. This will be an area between the 20 and the 80 for the oversold and overbought areas.
When you look to trade the Stochastic at these oversold and overbought areas. Very often when you take the trade, very quickly price will continue in the same direction causing you another loss. Once again, take a look at your charts with the Stochastic and look to see when it actually turned over.
Did you actually make a loss or win on that trade?
Just like with the Bollinger Bands, using the Stochastic at these overbought/oversold areas. You can see the indicator change the image you once had for the entry.
In other words…as price continues in the same direction, the indicator will move higher or lower as well. The Stochastic can also do this many times over, bouncing around these overbought/oversold areas. Therefore… creating a number of losing trades within a row.
So, when it comes to the question “how to trade Forex with indicators” I suggest to try and avoid trading these indicators with the use of the oversold and overbought areas. Now, not only can these move with price, but they will also lag behind!
4. Why indicators are a lazy man’s way of trading.
How to trade Forex with indicators, is going to be trading the markets as a lazy man’s way of trading.
With any type of career path you go down, you’re always going to need to do the correct analysis yourself. Using Forex indicators you are totally relying on the indicator to give you an entry to take a trade. So by using Forex indicators you are actually taking away the human element to trading.
And… as I mentioned earlier on in this lesson, the markets are moved by traders and they are move buy their emotions. So if you’re one of those lazy traders, who sits there and waits for an indicator to provide you with an entry.
Are you really trading the Forex markets, or are you actually being what is called a lazy man’s way of trading, from just following what something else is telling you when to trade.
When I started trading I asked the same question “how to trade Forex with indicators”? I must admit, I fell victim to thinking that following the indicator for an entry was the best way to make a consistent profit.
Fast forward to today’s world of trading, the truth to becoming a successful Forex trader, you have to rely on your own analysis when taking trades. This means stop using those Forex indicators to trade with, and start learning to trade, using a skill that you will have for the rest of your life. Learning to trade in this way, you will then be able to understand why you are taking a trade not just following what a indicator is telling you.
Let’s say, you have an entry setup using one of the indicators I suggested above. Let’s take the Stochastic indicator, you had a buy trade coming from oversold area with a candlestick pattern to take an entry. With being a lazy man’s way of trading, you see this as an entry because the indicator demonstrated it.
Now if you’d been trading with using your own analysis, you may have spotted that in fact. You was taking the entry at an area on the chart into a resistance level.
Therefore… the trade becomes a loser because price reversed off that resistance level.
In other words, because you was relying on the indicator with the entry you missed the major area where price was going to reverse at. So if there’s one bit of advice I can give you as a new trader, is to always look to learn to trade with being able to use your own ability to understand the way the markets move.
Plus… to understand where you need to be looking at those points of the market, where reversal trades can occur, and where you need to be looking to take a potential profit target.
One indicator you can use to make profits!
Now, I did say at the beginning of this trading lesson, I would be sharing with you one indicator that you can use to make consistent profits. I also said I would share with you how to trade Forex with indicators, using only raw price on the charts.
More on that later on…
Believe it or not, I suggest the use of the moving average as the one indicator you can use.
But… like I said, if you don’t know how to use an indicator properly, then you won’t make consistent profits. Unlike using the moving average with the crossover, this strategy is using the moving average with just price on the chart. Also you won’t be using the moving average for an entry, but rather price action on the chart.
To find out more on this strategy using the moving average, check out another trading lesson I recently wrote and start profiting from the markets today…
As soon as you have finished today’s lesson!
How I went from how to trade Forex with indicators, to trading price action!
I went through same challenging phase when I started. With loss after loss with using Forex indicators. There were times I felt the world was just against me. I wanted to quit so many times after suffering from so many heartaches and frustration.
Indicators did not work, accounts got blown and my savings account was dwindling fast. It was heartbreaking and it was total frustration especially when I put in my best efforts, yet nothing seemed to work.
I wanted to give up…
But I just couldn’t, plus there was too much at stake. I spent hours trying to figure it all out, I felt my Forex trading career was doomed!
I had to make it work!
I pulled myself together, I knew there had to be a way to turn things around. Other people where living my dream so if they could do it, I knew I could too! I was determined to find out how. After doing many hours of research into Forex trading education, I came across trading with price action.
More importantly, there was not the use of how to trade Forex with indicators! So, from that point on-wards my trading dramatically changed forever! This can be the same for you, if you are using indicators with no success, then you need to make the change.
Start learning to trade with price action instead.
So lets some up this trading lesson with how to trade Forex with indicators.
Don’t fall victim and let indicators wreck havoc with your trading!
Using an indicator to trade the markets, you’re going to find that indicators lag behind price. Therefore, when you try and take a trade you’re always going to catch it at the end of the current move. So, removing indicators you won’t now be catching trades too late, and taking a loss after a loss.
Another problem with Forex indicators, is it will clutter your charts, making it difficult to see what’s really happening on a price chart. By this I mean, with seeing how price is reacting to a level of support or resistance, or how price is actually moving on the charts.
Removing all indicators, will then give you a clear picture of what’s happening, and stop you missing those key levels on the chart. Plus… using indicators can also create a nightmare for yourself, when trying to pick those tops and bottoms at those oversold/overbought areas within the market.
So, start your journey as a Forex trader, and learn to trade using just price on the chart.
My journey as a Forex trader started with how to trade Forex with indicators, but I’ve ended my journey with now becoming a successful and profitable trader, with trading just price action on the charts.
To find out what other Forex trading education I have to offer, click here