Technical analysis: indicators vs price action
Trader’stoolkit has no boundaries. To date, many automatic approaches for analysis of a financial asset have been created, as well as methods for determining its future value. So,everyfix api trader can use both fundamental and technical data, which will become the basis of the trader’s trading strategy.
I suggest that you consider the two most popular methods of financial asset analysis used by the absolute majority of market participants, namely trade through the use of technical indicators and the price action strategy.
Technical indicators are mathematical models that allow you to analyze assets using special formulas for calculating price quotes. Indicators are visualization of various price combinations, which with the help of computer developments, are placed directly on the price chart and indicate for the availability of the ready-made trading signals.
Indicators can be divided into several types:
• Trend (Moving Average, Bollinger Bands, ADX, etc.)
• Oscillators (MFI, RSI, Awesome Oscillator and so on)
The manager can pick up several different combinations of trading indicators and on the basis of this form his trading strategy.
Price Action is a kind of trade, in which absolutely no additional technical capabilities are used, and the trade itself is conducted directly on the basis of candle combinations. Thus, fix api trader conducts analysis of a clean schedule. For this approach, you do not need to use mathematical models, but only patterns that already have a sufficient number on the fix apiforex market.
Speaking about the patterns, they can also be divided into several types:
• Trend continuation pattern (triangle, flag, pennant, etc.);
• Turning patterns (double bottom/top, “head of the shoulders”, etc.);
• Candle combinations(harami, pin bars, shooting star/hammer, etc.).
A wide variety of candle combinations allows the fix api trader to find more investment opportunities for concluding trading positions.
Each of the kinds has its own advantages and disadvantages.
+ They allow you to simplify the process of searching for trade signals by trend and correction;
+ They may be a trailing stop for the trading strategy;
+ In combination with different groups, they are reliable filters for commerce transactions;
– If they are used as a stop loss, there will be a large loss parameter in points;
– Author’s indicators show far less results than the standard ones.
+ The whole market trades based on these elements, hence the reliability of the signal is higher;
+ It serves as an auxiliary factor for determining the purpose of the movement;
+ The majority has a standard ratio of profit and loss of 3 to 1;
– It demonstrates a lot of false signals;
– Some patterns are contradictory;
But what to choose for your fix api trading?
Personally, I advise you to resort to this and that option. After all, a huge list of both patterns and indicators, says only one thing – most of them are of low quality. Therefore, it is worth choosing the most optimal options that would be perfectly combined into a single trading strategy. Thus, if you trade on a trend, add to your analysis the figures of trend continuation. If the correction is needed, analyze the figures of the trend reversal (http://www.investopedia.com/articles/trading/09/what-factors-create-trends.asp). This will also increase the list of possible signals and filters to confirm them.
Undoubtedly, if you are just starting to get acquainted with the market, I would advise you to start with the Price Action strategy, which would allow you to penetrate deeply into the specifics of the market and its movement. After all, the indicators will in some way interfere with you. And if you observe market’s trends and the reaction in the news, then this will be a plus. But again onlyin the first stages. In the long term, I would recommend you to attach technical indicators to the Price Action.