With countless number of indicators available today, many traders are on the constant lookout for that one Holy Grail Indicator, which can predict the market movement 100% of the time. Sadly, there is no such indicator and there will never be one. The sooner we can accept this universal fact, the better our chances of winning in this competitive game of forex trading.
In our search for the Holy Grail, we tend to forget the essential constituent of these markets –buyers and sellers. It is the interaction amongst these buyers and seller which determines market prices. ‘Interaction’ is nothing but the price at which both these buyers and sellers are willing to transact. This ‘Interaction’ Price is a factor of the perception that these individuals have for a particular forex pair. Let me explain this with an example. Jack thinks Euro will rise going forward and Betty thinks it will fall. They both enter their orders for buying and selling respectively. Ideally both followed their perception and believed that the price will move in their favor in the near or distant future.
Now picture this - the forex markets are the most liquid markets in the world with $4 trillion in daily traded volume with millions of transactions each day. These transactions represent the perception and beliefs that thousands of individuals have about the price of a particular forex pair.
My question to you – How can any indicator in the world measure the perception and beliefs of these thousands of individuals with 100% accuracy? That said, this does not mean one should disregard indicators such as Moving Averages, RSI, Stocs and other popular indicators. All these indicators also have an average success probability of 50% but the fact that many people use them makes them stand out from the crowd. We will talk about these later in some other post.
If you are one of those who is on the constant lookout for Indicators I would recommend you to stop doing that because it is an endless goose chance which will lead you nowhere. Start sticking with the popular ones and drop the fancy one’s out there, your trading will be much more profitable and simpler.
In our search for the Holy Grail, we tend to forget the essential constituent of these markets –buyers and sellers. It is the interaction amongst these buyers and seller which determines market prices. ‘Interaction’ is nothing but the price at which both these buyers and sellers are willing to transact. This ‘Interaction’ Price is a factor of the perception that these individuals have for a particular forex pair. Let me explain this with an example. Jack thinks Euro will rise going forward and Betty thinks it will fall. They both enter their orders for buying and selling respectively. Ideally both followed their perception and believed that the price will move in their favor in the near or distant future.
Now picture this - the forex markets are the most liquid markets in the world with $4 trillion in daily traded volume with millions of transactions each day. These transactions represent the perception and beliefs that thousands of individuals have about the price of a particular forex pair.
My question to you – How can any indicator in the world measure the perception and beliefs of these thousands of individuals with 100% accuracy? That said, this does not mean one should disregard indicators such as Moving Averages, RSI, Stocs and other popular indicators. All these indicators also have an average success probability of 50% but the fact that many people use them makes them stand out from the crowd. We will talk about these later in some other post.
If you are one of those who is on the constant lookout for Indicators I would recommend you to stop doing that because it is an endless goose chance which will lead you nowhere. Start sticking with the popular ones and drop the fancy one’s out there, your trading will be much more profitable and simpler.
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