Close your eyes and picture a professional trader sitting behind his laptop executing trades? How fast are trades being executed? Is it trade after trade? Well, that image of the savvy trader executing trades quickly has to do with trading based on your intuition and not on technical indicators.
Unfortunately, not all of us are lucky enough to have a powerful intuitive compass in the market. The case for the majority of traders in the forex market or any other financial market is that they have to use complex and intricate forms of analysis to find the right spots in the market.
So how can you grow your intuition as a trader and no longer rely on indicators for trading?
What Are Trading Indicators?
Indicators are basically pieces of formula that can be presented in the form of a pattern of shape on the chart. The main thing that they do is that they indicate to the trader what is going to happen in the market or rather what is likely to happen.
Read more about Forex Indicators
There are so many different types of indicators that can be used by traders in various markets. As such there are so many different classifications and categories of indicators.
The two major categories of indicators are technical indicators and fundamental indicators.
Technical indicators are the indicators that are used in technical analysis.
Technical analysis itself involves the analysis of the price movements and trading volume data that have happened in the recent time frame (time frame can be defined in different short to long terms).
It analyzes the market based on price actions and trading volume. The majority of trading indicators are in this group.
There are different classes of technical indicators including volume indicators, trend indicators, volatility indicators, and momentum indicators.
- Trend indicators: this class of indicators will provide information about the trend that exists in the market. Trends are valuable for defining a general approach to the market.
- Volume indicators: these are of course used to find out the states of overbuying and overselling in the market. Otherwise the places in the market where the most volume can be seen.
- Volatility indicators: these would be shortest term indicators since they are mostly used by day traders and scalpers to find out places of temporary ups and downs where the trader can enter and exit just as quickly.
- Momentum indicators: the last major class of technical indicators are of course momentum indicators. With the help of these indicators you can find out where the sentiment of traders is taking the market to, and if it is profitable you can swim along the same current.
These are the main classes of indicators that are used to provide a wide variety of different information. Depending on the style and strategy of trading, forex traders can choose to use any of these indicators that fits their situation best.
But there are yet more indicators.
The second major category of indicators are fundamental indicators. As the name suggests, these are more related to the fundamentals of the market and not the micro elements that are involved on a day to day basis.
The micro elements on the other hand are the big picture economic indicators that include data and information that are released mostly by the governments, central banks, or at times autonomous organizations that track financial metrics in various economies.
These indicators include data such as gross domestic product, inflation rates, unemployment rates, even things like trade deficit.
All the economic indicators that can somehow affect the market. Of course, using these indicators are again dependent upon the type of trading strategy that you employ.
It all sounds too complicated? Well, this is exactly why we are talking about trading without the use of indicators. But to find out how you can trade without indicators, we need to see the purpose behind using them.
Why Do Traders Use Indicators?
The reason forex traders or other traders in markets such as the stock market or the commodities market would use indicators has to do with the fact that we all want to make money in the market.
And these markets are not as simple as you would otherwise think. A market such as the real estate market has always historically gained in value, with one notable exception back in 2008.
So it is not really trading magic if you purchase real estate and believe that in due time it is going to increase in value. That is pretty much a given.
But if you go about and blindly purchase foreign currencies, bonds, stocks, or commodities, there is absolutely no guarantee that you would benefit from them in the future. For all you know, the value of them could drop down to nada in a matter of days.
So to make sure that you are stepping on a firm stone, you need these indicators to provide you with a rough picture of the future, even though no one can really predict the future of any market.
Also, depending on the form of trading you want to do, some indicators are definitely helpful. Especially if you want to trade quickly and with high frequency in the short term.
Sounds like we are only praising indicators, right? If so, how do we expect you to trade without them?
Why Should You NOT Use Indicators?
If you are looking at the title of this section and you are thinking to yourself that it goes against everything that we have said so far, you would not be wrong.
We are going to make the case against indicators now.
And of course with all the functions and applications that indicators have going for them, there is a case to be made against their usage.
Most importantly, using indicators can be quite time consuming. First you need to put in the time to learn them and master them. Then for every trade you need to execute them and make sure that you’re indeed executing them correctly. So much so that in many cases more than one indicator is recommended to be applied just to provide further confirmation.
So if you want to trade quickly and smoothly, you definitely do not want to be relying on trading indicators all the time.
But wouldn’t you just make mistakes without indicators? How is trading even possible without them?
How to Trade Without Indicators
We finally get to the big question.
But before we answer it, please remember that there are countless schools of thought when it comes to trading styles and approaches. There is not just one right answer. Here, we are just going to provide you with our perspective of the matter, and here it is.
The way you can trade with indicators is that you first need to learn how to trade with indicators. So if you were looking for an easy way out, we’re sorry!
The fact of the matter is, you simply cannot just rely on your personal intuition as a trader and expect to be able to execute perfect trades.
Nobody is born a trader.
Trading is a skill that you need to learn. You need to put in the time and trade enough with various indicators under various market conditions with different trading strategies to fully understand how the market works.
That is when you become a seasoned and truly experienced trader. A trader who has enough knowledge of the market who can execute trade based on his own discretion.
Trading without indicators is of course a real possibility. There are many different ways and methods with the help of which you can trade where you do not need to use any form of indicator.
One truly proven method to trade without indicators is through the path of learning and experiencing. We do not recommend trial and error in order to find out your previous trading intuition. Instead, you need to drudge through the drudgery and come out of the other side a truly skillful trader who can fully trust their experience in executing trades.