This action might not be possible to undo. Are you sure you want to continue? Chapter 1 - Technical Indicators Introduction to Supply and Demand Supply and Demand Basics Applying Zones to Risk Management.
Developing a Trading Plan Technical ind icators are the tools used by traders to aid them in the decisions of when to enter and exit a trade. They vary from oscillators, moving averages, and trend lines to complex mathematical formulas. Indicators are divided into two categories: Generally speaking, oscillators like RSI and Stochastic are considered leading indicators, while indicators derived from moving averages, like MACD are considered lagging indicators.
Lagging indicators get you into the trade late and leading indicators are prone to false signals. There are more than different technical indicators available to traders, but you could spend all the time and money in the world learning these and you would not be much better off than when you started.
You may be able to. An analogy to this would be trying to predict the weather. Weather forecasting is the application of science and technology to predict the state of the atmosphere for a given location. Human beings have attempted to predict the weather informally for millennia, and formally since the nineteenth century. Once an all-human endeavor based mainly upon changes in barometric pressure, current weather conditions, and sky condition, weather forecasting now relies on computer-based models that take many atmospheric facto rs into account.
The chaotic nature of the atmosphere, the massive computational power required to solve the equations that describe the atmosphere, error involved in measuring the initial conditions, and an incomplete understanding of atmospheric processes mean that forecasts become less accurate as the difference in current time and the time for which the forecast is being made the range of the forecast increases.
The use of ensembles and model consensus help narrow the error and pick the most likely outcome. I could waste a lot of your time writing about the disadvantages of technical indicators, but that is not what this book is about. If you are new to trading, there is a better way. If you are a seasoned trader and you disagree with me, you can still apply the concepts you learn in this book to improve your percentage of successful trades while still utilizing your favorite indicators.
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