I have lost count of the amount of times somebody has asked me what the single best indicator in technical analysis is. Up until the point of asking that specific question, it is usually the case that the person has already tried and tested pretty much every indicator and trading technique which they could get their hands on, a story which unfortunately is most common amongst traders worldwide. As I have often written in the past, it is not the fault of the trader to try out all these different methods because they are encouraged to by the amount of free information on the web today and books available to buy from the stores out there. However there is hope for the market speculator who is determined to search for ongoing consistency in their trading activities, yet it is not typically the answer or solution which they really want to hear.
Without a shadow of doubt, any disciplined objective trader out there will more often than not tell you that the very best indicator that anyone can use is simply price itself. If you know how to objectively read a price chart, it will tell you all you need to know, from where to get into a trade, where to get out for profits or a small loss and from time to time, when to actually not even place a trade. Price always leads everything else. Any other technical indicator we can place on our chart is nothing more than a derivative of the actual prices which have been trading in the past and what are trading right now. If the market is shut and prices are not moving, then obviously the technical indicator itself will also be static. The fancy calculations and formulae used in the indicator itself are a useless empty shell if they are not given price data to work with. Therefore, we have to recognize that if price is the key component or fuel for the indicator, it then has to be the most important piece… Continue Reading
