I strongly believe that simplicity brings clarity of thinking, clarity brings decisive actions and actions produce results. In the trading profession many traders make their lives far too complicated for their own good. It comes from trying to find a Holy Grail, and being right all the time. The bad news is – in trading such a thing does not exist. If it did, there will be no markets!
Coming to back to how we traders can make things complicated for ourselves let me present a chart to you:
What do you see – a spaghetti! The indicators placed on the chart are all well researched, have been created by some great people in trading business and have their value. But there are so many of them available and that fact that even though they work within certain conditions, they don’t always and hence teh temptation to add more to find the elusive Holy Grail. Unfortunately what happens is not only you don’t find the Holy Grail, you end losing the sight of most important piece of information (or call it an indicator) – the price. Mind it most of the indicators are lagging – they only indicate what has already happened as most of derived from the price anyway.
In my view we should focus on the important indicator and that is price and how it has been moving over time. For that you need to keep your screen clear and perhaps use one or two to support your analysis. Whatever you use, use it consistently else how you will know whether it works or not.
I personally work with fairly clear charts so I can what price has done over time and look for ‘value’ areas by visual inspections first and foremost. A few indicators are used just to look for areas of confluence Fibonacci being my favourite. Trading doesn’t have to be taxing, we make it taxing because we often have unrealistic expectations.