Some time ago, I published an article on the use of moving averages, which attracted a lot of attention. At the same time, I also found that many people have some misunderstandings about technical indicators.
Today’s article will talk about the misunderstanding of the use of technical indicators. Why do many people always lose money when trading with technical indicators? Are technical indicators useful?
The article is relatively long, it is recommended to bookmark and read, and you can like and forward it if you feel that you have gained something.
[The real role of technical indicators]
Technical indicators are really what they are: standards by which traders place trades, not forecasts.
A netizen left a message: I think the biggest problem is not whether to look at indicators, but whether to use indicators to predict the market.
Is the indicator used to predict the market? of course not.
Many of my peers, including my friends who have been trading for many years, believe that technical indicators are used to predict the market. Why does everyone think so?
Because you can get huge wealth by predicting the market, there are countless people guarding a bunch of indicators every day, watching the numbers that are constantly losing money and never giving up, because everyone has the belief: as long as I study these indicators thoroughly, I can Make money by predicting the market!
This is the comfort that all people who lose money give themselves.
I am here to say something very realistic and very "cool". All market trends are in the future, and the future is unpredictable, unless you are a god and you are a sky, and you are a person whose luck will always be overwhelming.
[What are the technical indicators used for? 】
Indicators are standards for trading. Fundamental trading is a subjective judgment of current and future trends, while technical trading is closer to probability. What we think about every day is not how to use these indicators well, how to thoroughly study trading techniques, but how to use these trading techniques Increase the probability of profit.
The following will use my trading system as an example.
In my trading system, I use moving averages and Bollinger rails to confirm trends. These two indicators are my criteria for confirming trends. The market is disorderly. Although the standards are consistent, the results are not necessarily the same.
The graphs below are examples of successful and unsuccessful trends that I identified using the same criteria, the graph on the left is successful and the graph on the right is failure.
What traders need to do is not to predict the future, but to use indicators to improve a trading system. After the trading system is verified to be effective, it is enough to output trading signals according to the indicators of the trading system.
[Indicator usage error 1]
Misunderstanding 1: Obsessed with the study of indicators, ignoring the fundamentals of trading is profit.
Some traders' charts seem to be technical indicators at a glance, trend indicators + shock line indicators; indicators that come with the chart + manually added indicators, using trend lines and then channel lines. As a result, there are supports and pressures everywhere on the chart; indicator A is bullish, indicator B is bearish, and if you switch the cycle again, it will be a mess.
All indicators are derived from prices and represent what has happened in the market and do not represent where the market is going to go.
The famous law of watches: owning more than two watches will not help people judge the time more accurately, but will create confusion and make people who watch watches lose their judgment on time. Likewise, using too many indicators is not helpful for trading.
Technical indicators are always just tools, and profit is the purpose of learning indicators, not the learning indicators themselves. Don't put the cart before the horse.
The picture below shows the indicators used by the two trading systems I have used for a long time. One trading system is moving average + Bollinger, and the other is moving average + zig; both are super simple.
And remember, the simpler the metrics, the more actionable they are.
[Misunderstanding 2 in the use of indicators]
Misunderstanding 2: The pursuit of perfect indicators.
A netizen left a message: The moving average is pretty good, but the volatile market is not very effective.
What this netizen said is of course correct. The moving average is the king of indicators and the best trend indicator, but its shortcomings are also obvious: once the price in the volatile market crosses back and forth above and below the moving average, the moving average will fail, and trading with the moving average at this time will result in losses.
But what indicator will not produce losses? Breen? MACD? RSI? Of course it will fail.
Everything in the world has two sides, and indicators have a profit side and a loss side; the so-called profit and loss come from the same source. To accept the good side of the indicator is to accept the bad side of the indicator.
What traders need to do is not to make mistakes and lose trades, what we need to do is to make profits cover losses and finally make profits in the transactions.
The picture below is the transaction record of my 10,000-dollar standard account. There are many mistakes, but the profit eventually covers the loss and the result is profit.
【Misunderstanding 3 in the use of indicators】
Misunderstanding 3: Divide indicators into three, six, and nine levels.
A netizen left a message: You can never make money with moving averages, it’s too low-level.
What's the matter? Is the technical indicator still using the contempt chain?
I generally don't reply to such messages, because once such messages are replied, there will be no results, and instead they will enter into endless debates.
I have said in other articles that I have studied and used many technical indicators, and the highest one is the master Gann chart. Many years ago, an old man recommended "He Shu Luo Tu" to me to predict the market, and what he said was plausible. I also bought a book like this under his influence, but I couldn't read it at all. Once upon a time, I was scrambling for high-end indicators, but later found that I didn’t make money by using these gorgeous indicators; so the prosperity was over, and I returned to the simplest purpose: to make money.
Can the moving average be profitable? The following are the data statistics I use for trading with moving averages.
Summarize
Indicators are always just tools. It is people who determine the value of tools, and traders who determine the value of indicators.
If you have any questions, you can find me in Huichat, or directly discuss in the message area.
Exchange number: 4009665
Add
