Finding an Accurate Forex Signal -
Looking at The Past
The task of finding an accurate Forex signal requires us to consider many things. The focus of this article, is to explore the pros and cons of using "trailing" indicators as a part of your toolkit. There is a school of thought that believes future events can be predicted by past actions. This may be generally true to some extent, but due to the abstract thinking of the millions of individual minds that make up the Forex market, a strong reliance on them for your Forex signals is risky business. Like it or not, all that technical stuff you likely have plastered all over your screen is history. It's all based upon information that is common knowledge... history. One of the many great things about the Forex market is the fact that "insider information" is virtually non existent. Sure, a major bank may be planning to exchange a billion or two of a currency, but the massive size of Forex means this is likely only to cause a blip in the prices. The information that drives currencies is a country's data releases... interest rate changes, GDP, budgets, employment, etc. This data is released, for all the world to see, at specific times, on specific dates. At the risk of bursting your bubble, there is no way any technical indicator will forecast what a pending data release may hold. In fact, this is exactly what "burns" many traders who are worshiping their technical indicators. On top of that, throw in a news report of a terrorist attack, or an announcement that some renegade country is planning a test of their new nuclear weapon, and everything goes out the window! OK, during normal market conditions, some technical indicators can provide "very general" signals that the "collective minds" are beginning to change their views, but don't take these as being an accurate Forex signal. Rather, use them as a small piece of "supporting information" along with the other Forex signals we cover. In summary, looking at the past for future signals for your trading is not a solid strategy. The factors that really move prices are completely unrelated to these past events. However, these signals may hold clues as to the likely effect (volatility) of prices, due to future events.
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