The first thing to remember when using an indicator, any indicator, is that it is a function of price action. The indicator itself is not the ultimate tool when it comes to trading…it comes in behind price action. Price action governs the information that the indicator will ultimately provide on the chart.
Price action is Indicator #1.
As such, a trader must determine what price action is doing (i.e. the trend) before consulting the indicator for an entry signal. Once the trend is determined, the trader can then consult the indicator for an entry signal in the direction of the trend.
Indicators should never be treated as the main decision-maker. They are basically just a reflection of price movement, so whatever price is doing will always come first and shape what the indicator shows. If price action is unclear, choppy, or driven by noise, indicators can easily give false confidRead more
Indicators should never be treated as the main decision-maker. They are basically just a reflection of price movement, so whatever price is doing will always come first and shape what the indicator shows. If price action is unclear, choppy, or driven by noise, indicators can easily give false confidence. The real edge in trading comes from reading price structure first like trends, support and resistance, and momentum and then using indicators only as a confirmation tool. When used this way, they support your decision instead of replacing your judgment.
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