3 Drawbacks of Forex Technical Indicators and How to Solve Them

Are you stranded on whether you should use technical indicators in 2021? This article will help you decide.

Reading this article will impart you with the knowledge to win from forex trading effortlessly. It starts by describing the challenges you will likely experience while trying to understand and apply technical indicators.

You will then find out the recommended way to simplify technical forex analysis without ignoring core analyses. What is more? Find out below.  

The Challenges You May Face While Using Technical Indicators

You are likely to bump into three main challenges while trying to use technical oscillators and indicators. First, they are too many, making it challenging to decide on the best.

Second, you may find it hectic to calculate advanced computations if your Mathematical skills are weak. Thirdly, no technical oscillator is independent. Here is more explanation of the drawbacks.

1.    They Are Too Many to Track Once

There are core technical indicators with several subdivisions. The root classification has four types of technical indicators. These are the trend, momentum, volume, and volatility indicators.

Trend indicators rely on historical data to predict price direction. Momentum indicators show the rate of price change.

Volume indicators echo the sold or bought currency quantities. Lastly, volatility indicators tell you the price quantity is changing in a direction.

The primary technical indicators further branch in several sub-units such as:

  • Stochastic oscillator.
  • Moving average convergence divergence (MACD).
  • Bollinger bands.
  • Relative strength index (RSI).
  • Fibonacci retracement.
  • On balance volume (OBV).
  • Ichimoku Kinko Hyo.
  • Chaikin money flow.
  • Klinger oscillator.
  • Average directional index (ADX).

You can group the related forex technical indicators into one or two of the four main classifications for easier understanding. But the truth remains that the massive technical indicators number will still overwhelm you.

2.    You May Be Unlucky if Your Mathematics Skills Are Poor

You may have a hectic time trying to manually calculate and plot the values of the numerous technical indicators.

Let us assume you want to determine the Moving Average Convergence Divergence of USDJPY for the forex pair for a duration.

You start by understanding and dissecting moving averages into SMA (Simple moving average) and EMA (exponential moving average). Next, you should know how to calculate the averages, explicitly focusing on EMA.

After finding EMA, you proceed to grasp major concepts of MACD before using the EMA calculations to compute it.

And here is the most frustrating part:

3.    Technical Indicators Are Not Independent

It may be a hard punch to calculate a technical oscillator then realize you cannot wholly rely on it to make forex trading decisions.

For instance, you have to combine trend indicators with momentum indicators to have a fair overview of the forex market.

Similarly, calculating momentum indicators force you to understand and calculate trend indicators. A typical scenario is applying MA in finding MACD.

Another weakness of the technical indicators is that they may give false signals. Typical examples are stochastic oscillators.

They help you determine market overbuying and underselling. However, they give false signals when the market starts to trend.

To overcome the false signal drawbacks, you have to track several technical indicators if you don’t want to lose your forex winnings.

The above challenges may make you wonder, “Can I gain from forex trading with poor Mathematical and analytical skills?” Yes.

Here is the most straightforward way to win from forex trading without struggling.

The Solution Is to Rethink Automation

Forex trading is no longer a thing for computer scientists or Mathematical gurus. With the surge in technological advancements, all you need is to choose an automated platform and profit from forex trading.

The most typical automated forex trading platform is MetaTrader 4. The software enables you to utilize several charts with many technical indicators embedded in them.

You can hire a collaborative robot to monitor, calculate and analyze the forex market forces on your behalf.

And the best part?

They can handle stop-loss and take-profit orders, leaving you assured you will not lose from forex trading.

Conclusion

If you are tired of forex trading false signals and tiresome calculations, start automating forex trading today. Trading platforms such as mt4 should solve your technical analysis challenges.

Leave a Reply

Your email address will not be published.