One of the common features of all the unsuccessful trading systems is the indicators misuse. The indicators can assist in the trade, but they should not be used exclusively as signals in the trade. The indicators should only be used to confirm what you see on the price chart.
The best indicator
There is extremely important to understand that the best indicator in the world is the PRICE. For example, if you look at the stochastic indicator and see that it is in the overbought zone, you may decide that it’s time to sell. However, if you look at the chart, you may notice that the price establishes the natural support and resistance levels. You need to pay attention exactly at these levels.
However, despite the fact that the stochastic shows overbought the selling can be very dangerous if the price doesn’t want to stop. In fact, stochastic overbought can last a long time, and if a trader sells only according to indicators, he can very quickly lose all money on his account.
A very simple way to determine the levels of support and resistance is to use the trend lines. However, one of the problems of trend lines drawing is an extreme subjectivity. If you give the same chart to three traders, we get 3 different results.
The construction of the trend line
So, how to draw the trend lines right? You should start with the larger timeframes. Start with the weekly charts, then go on the daily timeframes. Try to draw the line at least through the three maximum (or minimum).
The more points of contact, the stronger a trend takes place.
After you draw the support and resistance lines you should wait when the price will touch one of this lines. The stronger a trend, the higher the probability of the situation that the price pushes off from the trend line. And then you have to be ready to engage in the trade.
The indicators can also help here. If you see that the price bounced from the trend line, you can check whether the indicators confirmed this. And if they confirmed, you have a wonderful trading opportunity.