There is no one or overall group of technical indicators that will always result in a profit that can be deployed for the foreign currency exchange or any financial markets, for that purpose. If there was, everyone would use it. From that, there would be no margin left for profit. As a result, increasing amounts of leverage would have to be deployed to increase profits, which would inevitably result in catastrophic losses when the markets turned. This was witnessed by all, with the ultimate result being The Great Recession.
The best technical analysis indicators are those that result in making a trade more likely to be profitable for the long term. In the book “Hedge Hunters” by Katherine Burton, it was stated that the best asset managers, those making billions from trading and investing in foreign currencies and other investment vehicles, were right about 55-60 percent of the time. What resulted in billion-dollar profits was the ability to cut loose the losing positions quickly and to hold on to the profitable transactions.
That is where technical analysis is very useful.
Depending on which forex indicators a party finds most appealing, based on personal choice, that is the mode of technical analysis that will be utilized. The “personal choice” variable in the equation is one that will determine which technical indicator for foreign exchange trading is utilized.
For the trader, technical analysis serves to alert when the opportunities for near term profits exist. These will generally result from inefficiencies in the market such as arbitrage opportunities or gap trading. While alluring, these can be very costly if the trade goes awry due to the nature of short term buying and selling. As legendary hedge fund manager George Soros who broke the UK Sterling has observed, in the shorter time segments, “financial markets are chaotic.”
There are no technical indicators that will put the chaos of the short term foreign exchange market forever on your side. The longer time frame of forex indicators, the more detailed will be the market outlook. That will result in the increasing likelihood of more profitable transactions for the trader, day trader, swing trader, or long term investor.
Those trying to profit from extreme short term trading are not utilizing technical indicators, even though they think that is what they are doing. They are speculating, which is the same as guessing. Study after study reveals that more than 80% of day traders and others lose money. Undoubtedly, many of those utilized technical indicators in there failing efforts.
The best technical analysis indicators result from the ones that put time on the side of the buyer or seller, depending on the position. From there, the biggest gains will be made. The billions are booked from long term trends that result in a change in market conditions for that asset class.