Am i using too many indicators ???
Hi Matt,
Welcome to T2W.
If you have developed a methodology with a positive expectancy that is consistently profitable over time, then I would answer no, you're not using too many. You're using the right combination and you're using them well. If, on the other hand, you haven't developed such a methodology, then the answer might be anything from yes, to maybe, to no!
Indicators are about the most contentious thing there is in trading, and their fans and detractors frequently come to blows. So, each trader has to decide for themselves if indicators have a use - or not - and which of the 100s that are available are the best for them. Only you can decide that. My opinion - and that of all other members - is just that, opinion. In spite of that and the many disagreements about indicators, there are some general points of consensus. Most members would agree that whatever indicator(s) you propose to use, be sure that you:
1. Understand fully how the indicator works and what it does.
2. Understand fully what its limitations are. For example, an momentum oscillator like RSI will indicate the market is severely overbought in a strong uptrend. Many traders (including me!) have lost money trying to fade the trend in a strong bull market on the strength of an overbought indicator reading.
3. Following on from the above, understand the difference between 'lagging' and 'leading' indicators - and the pitfalls of each. The former is great for trending markets but will lose you shed loads of money in a rangebound one. With he latter, you run the risk jumping the gun and getting in too early before the current move has finished.
4. If you use more than one indicator, be sure that they complement one another and aren't just a different way of saying the same thing. E.g. there would be no point adding CCI to your current selection given that you already use RSI.
5. Understand that indicators make a poor substitute for your eyes and your brain. These are the best tools to filter whatever it is you think the indicator is telling you. Use 'em!
Tim.
