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Technical Indicators: Pros and cons
lhorgic
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2024-03-26 11:54:09
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Hello guys! It been a while...I trust you're good and keeping well. I really missed been here, I just couldn't keep up with blogging round my regular communities last week. But it's a new week and am back with renewed energy.
I brought to y'all another topic I believe y'all would find interesting. You can already see what we've got up there. We would be looking into the topic Technical Indicators, touching on it advantages and disadvantages.
Let get into it right away guys.
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The crypto space is such a very risky and delicate terrain especially to those who haven't learnt the ropes. The terrain is designed in such a way that whoever fails to equip him or herself with the required knowledge for this space would suffer huge loss.
Part of the equipping include learning how technical analysis works and how it can be leveraged upon to make profit. The use of indicators to study market behaviours is an offshoot of technical analysis.
Our focus today is on Indicators. We would be considering shortly what an indicator is, coupled with it advantages and disadvantages.
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Indicators are one of the tools used by traders to analyze the current happening in the financial market. It is used both in the forex market and in the crypto market.
Traders can...on the strength of the information supplied by the indicators of their choice predict price movement and make some informed decision.
However it's imperative to mention that indicators are not some 100% surety tools. They could flop and mislead sometimes.
Technical analysis can be traced back to the era when some Japanese rice trader were carrying out their rice business. One of the things they noticed about their trade was they it operated in a cyclical manner.
That is, there is this re-occurence and predictability associated with this business. This observation was part of what gave birth to he **Japanese candlestick** which became a major tool even among today pro traders.
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• Technical indicators can be used to identify good entry and exit position. This has been proven many times. Every trader are very calculated in their trading activities.
There is actually a time to open a position, I mean enter the market and a very key time to exit the market. Failure to enter when you're suppose to or exit when you're suppose to will cost you seriously.
With indicators this crucial times can be identified.
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• Indicators can also be used for confirmation especially when dealing with price actions. There are traders out there who takes delight in focusing on just price action for their trading activities. They have so mastered the art that they hardly fail.
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However, they could be cork sure with the use of indicators to confirm the signals they are getting from price action. I believe traders in this shoe will find this tip resourceful.
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• Indicators can help you make informed trading decision when used accurately and can be very effective when the market seem very volatile.
But when you do not understand how it works you might find yourself caught up in the unfavourable part of the market.
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• Indicators could give slow or lagging signals. This is common with most indicators that's why we have some indictors tagged as leading indicators while the others are tagged lagging indicators.
One could miss out of some juicy opportunity when one receives late signals about some profitable market moves.
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• False signal is another thing traders who uses technical indicator would have to deal with. False signal are bound to happen and this occurs majorly when you used indicator that are not directly suitable for the current market.
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It would only mislead you and when you take a decision based on those false signal, you would definitely run at loss. One needs to understand what indicators works perfectly well for every market phase.
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• Technical Indicators do not take into consideration fundamental factors that play a major role in determining the price of assets in the market. They only take into consideration historical facts and data.
This means, fundamental factors can override one's prediction and decision made on the strength of technical analysis through the use of indicators.
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• Technical indicators are not effective when used alone. It has to be used together with another indicator. This is done so that error can be avoided and brought to the bearest minimum.
A trader who only knows how to use just one indicator would most likely suffer some set back in his trading adventure.
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• The use of technical indicator require long time practice. You would need to invest your time and resources to understand how to use it to your profiting. Before you can form a strategy out of it, you must have back tested it severally.
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There you go friends.I would love to wrap it up at this juncture. I want to believe you've gotten so much from this piece. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.
Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!
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**Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.**
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Regards
@lhorgic♥️
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