How Many Indicators Should You Use, or Any At All?

When you place a binary options trade, you’re essentially making a wager about what the price of an underlying financial asset is going to do. In order to make that wager, you need to have a basis. One of the most common types of analysis that is used to form a basis for a binary options trade is technical analysis. With technical analysis you sprinkle indicators on your chart and see if your indicators give you a signal that price is going to be moving (or not moving) in a certain direction at a certain time.

Indicators Do Not Do All The Work For You

Many beginning traders think that the more indicators they have, the more accurate they will be. This is not necessarily the case.

The problem with too many indicators is that you can complicate your system right out of its usefulness.

The more indicators you have on your chart, the more you’re going to get conflicting signals. Confluence is a good thing, but too many different signals telling you different things is just going to confuse you. It’s also literally just harder to see what you’re doing when you have so many things on your chart. All that clutter can translate into psychological clutter. And the fact is that the more variables you have in your method, the more you’re going to have to test.

Trade With Indicators Or Without

It’s possible to trade successfully without any indicators on your chart.

Many people who trade using fundamental analysis and price action do just that. There are benefits to putting indicators on your chart, however, even if you don’t use technical analysis as your main tactic. For example, many people who trade using price action also add some moving averages to their charts or MACD. This provides a context to what they see with the price patterns by helping them to visualize what the market is doing. A buy signal from a price pattern is even better if it happens to be off of a moving average acting as support.

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If you use a technical analysis based system, see if you can strive for a similar simplicity in your layout. Two to five indicators will serve most traders better than six to ten or more. Less can be more. With your method, try to pave a path of moderation.

Use enough indicators that you can see what’s going on, but not so many that you become lost in a maze of contradicting signals and cannot make a trading decision.

Keep in mind that many of the seasoned traders advise new traders to learn to gauge price action on their own without the use of any special indicators. The reason for this is that if you use a raw understanding of how price action works then you are going to be able to better judge price action in the future. Compare this to starting out using fib lines and MACD lines on your charts and your mindset will begin to start requiring those indicators on the chart for you to even start to feel comfortable trading. If you are looking at a chart on the legit 24option trading site then you will notice just a line. While we do not recommend just using this type of chart to make your trades, if you get a candlestick chart, something like you can get with MetaTrader 4 or for free at FreeStockCharts.com, then you can watch price move in real time in the markets via candlesticks.