Do The Technical Indicators Work?

The moving average crossover is a very important technical analysis tool that the futures traders use. It lets the trader identify the momentum in the market and know where the market may be moving now.

Fibonacci Retracements are used to find levels from where the market may bounce. Hop over here to know how to plot the Fibonacci retracement line.

Both these above indicators are useful to identify trading opportunities in the market. Both of these tools can be used at the same time too and this helps to increase the probability of the trade working out.

Here is how you can use the Fibonacci retracement and the moving average crossover together. On the asset, you first draw a Fibonacci retracement on the chart. Suppose you see that the price hits the retracement line at the 38.2% support level and at the same time you see that there is a moving average crossover. This gives you a high probability that the trade may work out.

Both the indicators working out together gives you an additional confirmation for the trade. This makes it easy for you to take the trade.

What should you know before using the technical indicators?

Technical indicators help to increase the probability of the trade working out. These give you an added confirmation. But at the same time, one should understand that the technical indicators are lagging in nature. This means that the technical indicators will show you direction only after the price has been hit. So, every time that you enter the trade using the technical indicator, then there is a high chance that you are taking the trade a bit late. This not only decreases your profit potential but at the same time increases your losses. Traders would, however, argue that since the technical indicators give them an added signal they prefer taking fewer profits and more losses on the trades as they are risk-averse.

Can you trade with the technical tools alone?

Technicalindicatorsshould is not used independently to take trades. These should be used along with the support and resistance levels as these indicators are used to give additional confirmation to the trades. It is very important that you first spot the high-level support and résistance levels and then take a trade if the technical indicators offer you an added confirmation on the trade.

The idea is that you first spot the high support and resistance levels first and if you see that the technical indicators are also showing a similar signal then you take a trade.