If you could ask a successful trader one question, what would it be? I can guarantee that the majority of people would ask exactly what I used for the title of this article: “What Indicator Do You Use?”
As an exercise, pop into any of the trading forums that are on the Internet, head over to the trading systems or trading strategies category, and click a few links. You will quickly see that question asked near the top of the posts. For me, when people see my trading chart, even with simply bars on it, I get asked, “What indicators do you use?”
Let’s get it out there… It is not the indicator that will define your success. Neither is it the “secret” settings that are used nor the number of indicators that are used. That question is actually quite meaningless and will get you no closer to your trading goals knowing that information.
As an example, if you see moving averages on a chart, what is the important variable in the trading plan? How about stochastic? Will knowing a stochastic is used help you in making trading decisions? It won’t help you at all without knowing an important variable.
How is the indicator used? Now that has something you can work with.
This chart has two moving average on it. Nothing too special or complicated, are they?
If I told you that trading with these two averages, I have a superb win rate with low risk and high profit potential trades, what is the logical question? If you said, “How do you use them?” you would be correct! Now that is actionable information that you could start using to improve your trading!
Questions that you ask can point you in the direction of your goals or further from them. In trading, it is the same thing. Far too many people get caught up in irrelevant thoughts and questions that do not move them closer to where they want to be. If we agree that psychology plays a big part in your trading success, don’t you think that you should laser focus on the things that matter? Ask questions that can produce actionable answers?
If you saw this chart for the first time and could ask one question, you would want to ask a question that would focus on concepts. That question is obviously about how to use what is on the chart. Let’s compare the questions:
What indicators are you using?
I am using two moving averages.
Does that help you? No.
How do you use the indicators on the chart?
Great question! Once they cross over, I am on alerts for shorts in this case. I need a bar to retrace up into the area between the two moving averages and close inside. Then, as long as there is not a moving average cross to the upside, I will look to sell stop below the previous lower bar low. Risk is defined above the swing high.
The last question is focused on information that you can run with. In reality though, this post is not about an indicator.
This post is about your focus.
There are many shiny objects that are looking to grasp your attention. In trading though, focus is everything.
- Focus on following your trading plan.
- Focus on following proper capital management so you are able to stay in business even after a string of losses.
- Focus on understanding that the indicator will not make you successful.
I remember when I got into trading and was deciding how to approach the markets; my question was about how to get on board the trend. How can I get involved in the action and, knowing that most people lose how to keep my risk low? Once I understood the concepts that I wanted to use to approach trading, I then set out to find how to make the concepts come alive.
I can honestly tell you that I never system jumped. I worked through things and if I was not “getting it,” I moved on to something else. My questions were all related to the concepts in my trading… that was my focus.
In this post, I attempted to get across that while questions are good, the focus should be on actionable information…something you can run with. Ask question in relation to concepts and that can actually even propel you into developing your own trading system. Even people that use an incredibly successful trading system such as Trend Jumper and Keltner Bells have added/subtracted a few things to suit their needs. They understand what their needs are because they have focused on the important questions that will empower their trading. They have tweaked it to suit their needs and they can only understand their needs because they focused on what mattered.