Technical indicators are something every traders knows.
Moving Averages, RSI, Bollinger bands.
I bet that if you are going to ask any beginner about trading, the words start to pup up from his mouth.
Not going to lie here, when I was learning how to trade, one of the first site I visited was probably babypips.com.
I started to consume all the content they provided for free and I thought how trading is actually an easy discipline and how much money I will make.
When I think back about it, its funny how wrong I actually was.
In this article, I will go through all the popular technical indicators and show you why I think they are not the best trading tools.
This piece of conent wont be dedicated to my trading strategy, If you want o learn more about how I trade, you can check out my Supply and Demand trading guide or you can get a free 4-Day Trading course if you click on the image below.
Problem with Technical Indicators
If trading would be only about waiting for two lines to cross, all of us would be millionaires.
But the reality is very different, most of the technical indicators are made by the people who want you to fail and they are also widely promoted by your broker, your guru, every free website on the internet.
I learned this pretty hard way when I was screaming to my computer why in the hell price is going down after bullish moving averages cross.
After some time of
But I always felt that I am too late to the trade and my risk to reward ratio was not the best.
This is why I only trade price action these days, it makes much more sense to me understanding a movements in the charts instead of blindly following cross of two lines.
If you are interested in learning how to trade price action, you can consider joining our MasterThePrice Academy.
You are going to get access to 26 educational videos where I explain everything about market manipulation, supply and demand trading, and you will be part of a private trading group with daily market reviews and trade calls.
Let’s move to the point.
Technical Indicator that everyone knows
Without a doubt, a moving average crossover is the most popular technical indicator.
There are a different variations which people are using. With most popular being “golden” and “death” cross.
The golden and death cross is crossover of 200 amd 50 MA.
Even though I think that using a weekly and daily MAs for trend following is actually a good idea.
Let me show you real charting example of the moving average crossover.
At the first glimpse of an eye, this looks decent, isn’t it?
This is USDCAD on the Daily timeframe.
The blue line marks out 50 MA and the red line is for 200 MA.
When red is above a blue, you are short.
When red is below blue, you are long.
But let’s take a look at the exact place of MA crossovers.
If you are going to enlarge the image you will see that:
- The first crossover happened after 84 days of a downtrend and the downtrend ended just a few days after that
- The second one could’ve worked but your stop loss placement would be all messed up and you must have been pretty lucky to make this profitable trade
- A third is once again after 51 days of a downtrend and your risk to reward ratio would be all messed up.
- The fourth one is the worst possible case to go long.
Just for comparsion take a look at how I trade using supply and demand concepts.
If you want to learn this price action concepts, you can join MasterThePrice Academy.
Of course, nothing in trading is perfect.
But using a horizontal levels and price action can provide much better profitability over just blindly following cross of two lines which 90% of the traders
Don’t relly on Technical Indicators
What I am going to show you now really puts sherry on the cake.
This is a example which I noticed while making the education course.
Everything you are going to see is from USDCHF H1 chart.
Signal number 1.
Rsi shows value over 70.
Most of the traders identify this as “overbought” situation and looking for shorts.
Signal number 2.
Bollinger Bands are out of equilibrium.
But when BBans show you move above upper bollinger band, it is signal that price wants to go down.
Signal Number 3.
Price indeed went little lower, I doubt that many people took profits though.
Especially with this beautiful MACD cross right ?
Signal Number 4.
After little consolidation we have a moving average cross.
This is a point when everyone is ready and all happy how they have this trading thing figured out.
Also, where do you think all retail trades put their stop-loss?
Just a little above previous high seems right isn’t it?
Well take a look what happens next.
Every retail trader and their mother got stopped out before a
How to use Technical Indicators
Well, I hope you see now why blindly following all the technical indicators might not be a best idea.
On the other hand, this doesn’t mean that you shouldn’t use a technical indicators ever again.
You can use a 200 weekly or daily moving average as your trend following indicator.
Oscilators might be useful for spotting a divergence in trading.
Always find a thing which is working for you in trading and backtest the hell out of it.
Me personally, I am not a fan of indicators, I give them a bit portion of my trading career and they never worked for me the way I wanted.
In my humble opinion, the price action itself is the only technical indicator you will ever need.