Forex Trading - Are Indicators a Waste of Time and Which Ones Give You a True Trading Edge?

Forex trading doesn't have to be hard, but this doesn't mean that it is easy. It is not uncommon for traders, especially new ones, to feel or experience some kind of information overload when trading. With charts displaying a seemingly meaningless zigzag of price moving up and down, it is no wonder that new traders are the ones who suffer the most from information overload. To combat this many traders turn to indicators, hoping that they will in some way alleviate the overload of information and simplify the process of trading. What is interesting is that many seasoned traders actually shy away from or at the very least use only the absolute minimum number of indicators in their trading. Does this mean that indicators are useless? If you are just starting out, how should you approach the problem of information overload and whether or not to use indicators in your trading? Are they a complete waste of time or do they actually serve some purpose?

Indicators are not a waste of time, but they are not the Holy Grail that many traders wish them to be. I would personally recommend that new traders play with as many indicators as they can until they feel that they have found a select few that work best with their style of trading. Many seasoned traders consider indicators a waste of time and often tell beginner traders not to waste their time on them. This is easy for them to say and do because experienced traders have years of experience which has allowed them to come to terms with information overload and deal with it on a mental level without having to use indicators. Put simply, they rarely, if at all, need indicators because they now "see" and "understand" more about the workings of the forex and currency markets thanks to the years of experience that they have. It is for this reason that I strongly suggest new traders to use indicators and to do so until they either find themselves not needing them or only using one or two at most at a time on their charts.

So what indicator should you use? The answer to this really depends on your style of trading, but the most powerful are momentum based indicators. These indicators plot the momentum of price and this is something that even experienced traders use in their trading (albeit many manage to do this without the need for momentum indicators and instead often say they can "feel" how price is moving). Momentum indicators are useful because they measure the rate of change in price. Put simply, if price continues to change at a steady rate or picks up speed, then momentum is considered to be high and price will be strongly trending up or down in the market. As price loses speed and the change in price drops, momentum drops. When this happens, it is possible that price is approaching a turning point in the market. These turning points offer an opportune time for you to get into the market, or close out any open trades locking in profit.