Technical Indicators – Should You Use Just One?

I get asked this question a lot.  They ask me whether I use any technical Indicators.  I say no.  They say not even one?  I say no.

They say come on, you must use at least some of the “key moving averages.”  I tell them no and they are surprised.  I tell them I am an order flow trader, not a technical indicator trader.  Technical Indicators do not generate order flow so I don’t use them.

They say you must use the 150 or the 365 ema.  Or perhaps for fast moving markets they tell me to use the 8 and 21 ema.  I tell them no I don’t use them and never will again.  With the sole exception is if at some point in the future they generate order flow.  Then by definition I will have to pay attention to them if they cause order flow to be generated into the market.  But I will be trading the order flow generators that currently work, up until that day comes, whether it comes at all.

I ask them why not the 12 and 25 exponential moving averages?  Why not the 6 and 18 exponential moving averages.  Then they go on and say, well so and so on this forum, or there are so many people in this forum thread using those so they must be good.

That’s the problem with many aspiring traders.  They just blindly follow what various threads on forums tell them to do, instead of thinking about what actually generates order flow and find some proof of it.  I tell them those exponential moving averages are nothing special, but they don’t listen and go back to following some ‘guru’ on some forum or chat room.

Then they ask well how do you tell when the market is trending?

I tell them there are a few different ways.  If you want a chart based way, you can just look at a chart and find the chart patterns and price patterns.  That brings you into the price action trader cycle.  The really easy way is to see if prices start in the bottom left and end in the top right, well that’s an uptrend.  If prices start in the top left and end int he bottom right, well that’s a downtrend.  A baby can figure that out for you.

Then there is the order flow way.  I like to use news, market sentiment, market sensitivity, global macro to get a feel for the market.  You enter the order flow trader cycle.

They say it sounds difficult.  I tell them no, not really.  I say do you want to spent the next 100 hours tweaking your technical indicators and never build any solid trading foundation, or would you rather spend the next 100 hours learning what really moves the market?

Asking the question what is the trend, is not even the best question to ask.  I am sure there were people thinking the EUR/USD was in an uptrend both on March 5 and June 9.  Didn’t seem to do them much good.  Instead the better question to ask would be, what would cause the trend to accelerate?  What would cause the trend to reverse?  What scenarios need to play out?  What combination of market participants and stops will be needed for bullish and bearish movements?  Those are the better questions.

I used to try to mix order flow with the technical indicator cycle, but it just failed miserably.  I found myself getting pulled back to the beginner trader cycle, and I did not want to go there.  Traders have an understandable hunger for confirmation tools, but the ones found in the technical indicator cycle are some of the worst.

You could use technical indicators and price action with order flow trading if you really wanted to.  You could use it as part of the exit strategy if you really want to.  There isn’t anything evil about it.  It is all a choice.  You can even add astrology to the list of confirming tools if you really wanted it.

But I think it is just crazy when you buy a Ferrari (order flow) and then try to go back to a Hyundai (technical indicators).

—-

Transform your trading with Order Flow Mastery.  Click Here.

—-

Click Here To Get The Free Report