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Tuesday, March 4, 2014

Technical Analysis, Technical Indicators, Important Consideration about Technical Indicators

Remember that some indicators work best during trending markets while others generate best results under ranging or trendless conditions.
For this reason it is important to choose different indicators for different market conditions. For instance, we could use one oscillator to forecast tops and bottoms when the market is ranging, but once either the top or bottom is broken, we could use the CCI to take signals based on extreme levels.
To trade based only on one indicator could be risky, we need to adapt our strategy to the different market conditions, and combine preferably indicators of different nature, for example, use oscillators in combination with candlestick reversal patterns to get our trading signals.
The other extreme is not good either, using a lot of indicators could complicate trading decisions and we could end up with a system that is hardly tradable.
For now, get familiar with each indicator and pattern studied in these past three lessons. Try to see which one of them fits you better and what combination of technical tools could help you achieve better results.

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