Today retail traders are trying to determine right entry or exit prices for their trade execution decisions with the help of various analytical tools. Such as: many traders are relying upon technical analysis, using various short term resources such as pivot points, candle stick charting, moving average, MACD and various charting tools to make maximum profit with less risk.
Absolutely agree with you: technical analysis fits the best if you need to define the entry point with the best possible risk-reward ratio. The main advantage of technical analysis is that it works almost the same way on any timeframe, so if you know the main principles, you will be able to find numerous opportunitites to apply them in youe trading process. Indicators are the most important elements of technical analysis. They could be used either to get additional confirmation for the idea based on fundamental analysis or sometimes even to make independent trading decisions based exclusively on the signals provided by such indicators. There are a lot of indicators available including built-in and custom ones, so any trader could find the indicators that fits best his trading system and needs. One of the main advantages of indicators-based trading systems is that they could be easily backtested using historical data with the help of special analytical tools, such as Forex Tester. Backtesting is very useful if the trader is going to find out whether his strategy would be profitable in long term perspective or not. It could also be helpful for the development of the strategy to determine the optimal set of rules. The results provided by backtesting are more reliable and accurate than the results of demo testing because it eliminates the impact of the trader`s psychology. In my opinion, each trader should have at least basic knowledge of indicators and the way to use them. For sure, some traders avoid using indicators and make their decisions based on price and volume, but it all depends on particular strategy.
