Why Most Forex Indicators Don't Work

Repainting & lagging calculations are part of most every indicator. That's why it seems entries & exits are just a bit too late.

Why Most Forex Indicators Don’t Work?

All of those indicators out there and all of the losers using them just don’t get it. Why would anybody think about following the losing crowd? Why don’t most forex indicators work? They are lagging? It is similar to what is termed “Monday Night Quarterbacking” for those familiar with American football. It’s easy to point out activity after it occurred. Agree?

Lagging indicators, for example, Bollinger BandsMACDRSIStochastics – the list goes on and on….These indicators take historical data and plot fancy lines and histograms. Do you need them? Do they help? No, you can just look at price action and get the same reading, or better. In fact, these lagging forex indicators provide a false sense of security. The primary problem, they are too late! Hence the term lagging or repainting.

So, What Can We Do?

First, don’t use lagging indicators or at least use them only for obvious recognition of timed trends or other superficial pricing activity that may need to be analyzed on a limited physical screen size. 

Price Action and Mathematics. Price is not lagging it is now! Math, it is finite and systematic. Two plus two will always be four.

Non-Lagging Indicators

Pivot points are plotted support and resistance levels that the current price action may or may not react to. At most they will provide you with a slight edge. Herein lies the problem. Price action may react to a strong level of support in one of two ways, reverse or break through. So, how does this help? Not much, however, they may, at times give a very slight edge and keep you in the know of price action as it relates to support and resistance.

Currency Strength

Having the ability to view currency strength, both in pair form and individual currency is extremely valuable. Especially when strength may be calculated across various time frames and compressions. Similar to price action, currency strength is in the now and not lagging. Is it gauranteed to put every trade on the winning side? No, neither is anything out there. However, it more often than not provides an edge to gain extra forex pips with every session. 

Price Action & Your Reaction

The astute may have already contemplated the fact that even currency strength and price action can change from one second to the next. Therefore, we can be wrong in our selection of direction. This too can be overcome with common sense math – in fancy terms – proprietary algorithms and our quest for the best number sequence.