When I first started trading Forex I spent hours drawing trend lines trying to figure out what price was going to do. I read everything I could about trend lines but no matter how I drew them or how many I drew, prices never seemed to obey them.
There is a very good explanation for this. It hinges around how many other traders in the world are looking at the same trend line and in fact have drawn the same trend line as you and are trading off it. The answer is, not many. Yes, occasionally it does happen, but traders get tricked into thinking that many of the tools used in trading and Forex trading have meaning when they don’t.
A trend line really only does one thing and that is provide a line in the direction of trend over some period of time. When you think of all the nuances involved in drawing them it should become plain to see that they are not a relevant tool for making a determination of what is happening on a chart.
Recently I was directed to a trading forum that was trading naked. No, no, not naked naked but price naked, without helps or so I thought. The first chart had 3 indicators, 4 moving averages, pivot points and that was not all. Looking at that chart it would take an hour just to explain all the intricacies of what was supposedly happening.
When a trader looks at a chart he wants to know which way price is going, when to get in and when to get out. Even a trader trading the daily charts, or longer, needs to have a way to enter the market with the least risk and the least draw down.
RSI, the Relative Strength Index has 4 trading signals which are little known and little used but are powerful trading signals that allow any trader with a short education to know what is happening on any chart. And with the use of an indicator called The RSI Paint Indicator, it can be even faster. These 4 signals tell the trader which direction the market is going, when to enter and when to exit. It really doesn’t get any easier and there is no need to add additional indicators which only confuse the issue.
Look for a trading method that allows you to make a simple but effective analysis of a trading chart, one that will earn you money.