Are analysis and systems more valuable than trading signals?
Dear Traders,
Many traders appreciate trading signals because of their simplicity and speed.
However, in most cases, trading signals eventually lose their value.
Why?
Receiving only one signal will, obviously, not really provide any long-term solution…
...but even regular signals often disappoint traders.
Each trader has a unique trading psychology.
Therefore, each signal will be interpreted, traded and managed slightly differently.
Join us today to learn how reading charts and performing technical analysis can help you overcome this weakness.
Problems with trading signals
Trading signals are known to offer clear action steps without the need to overthink the trading process.
Obviously, this is an attractive quality for beginning Forex & CFD traders and other traders as well.
Analysis can seem confusing and contradictory, whereas trading signals show entry levels and dictate trade management rules.
Unfortunately, a dozen potential problems are lurking around the corner and could pop up at any moment:
- signals often look good post-fact (after the moment is long over)
- the signals are mostly difficult to replicate due to trading psychology
- all systems have drawbacks, but traders quickly lose patience during a series of losses
- asking traders for one signal at a time offers conflicting information and fails to give a long-term solution
- regular signals do not explain how trade ideas are generated and do not provide any learning experience.
Their solution to these problems?
Traders simply move on to a new source of signals – forums, Twitter and asking other traders for entries.
A better way is to read and understand the charts instead.
You can do that by using Fibonacci, chart patterns and candles (see the image below).
Is technical analysis worth learning?
I do not believe that simply following trading signals will make a trader resilient and prepared for tackling the markets in the long run.
Signals are, in my opinion, a shortcut and do not provide a sustainable solution.
Learning technical analysis or learning a solid trading system, however, is a good investment of your time and energy.
Of course, learning the art and science of technical analysis seems scary and leads to volatile results and drawdowns in the beginning.
This is one of the reasons why it's best to start with a demo and practise.
In fact, completing your own analysis can even seem confusing at first, especially if a trader needs to act according to that homemade trading plan.
But don't be afraid.
Learning to read charts and performing technical analysis demands a lot of effort – but it does come with big rewards.
Why technical analysis offers more
Learning the art and science of technical analysis empowers traders to take their own decisions.
This, in turn, allows traders to learn from their mistakes and gain experience, skills and knowledge.
Eventually, traders will start to understand the markets, the market structure and the price movements.
They will also grasp their own trading psychology, thus focusing on setups that match your style…
Last but not least, performing technical analysis is creative, fun and inspiring.
Technical analysis provides you with new skills and knowledge in tackling the financial markets.
When I just started trading, my only focus was to find trading signals for potential entries.
This went well at first but then I deviated from my plan and lost all of my gains.
That was a decisive moment in my trading, when I realised that looking for shortcuts will not do.
I decided to look for alternatives.
I discovered technical analysis, price action, candlesticks and wave analysis.
This provided me with a clear roadmap for using technical analysis, and interpreting price, trend, patterns and market structure.
Don't get me wrong – the way I perform technical analysis is just one method and I encourage you to find your own trading system, tools and methods.
To get a proper start and better understand the market structure, please watch our video below.
Want to learn more?
If you'd like to learn more, please check out our dedicated section on technical analysis, which is constantly being added to, so you'll always have access to the most up-to-date information.
Or join our Zero to Hero course, where we not only demonstrate a clear trading system but also discuss how traders can find a trading style that suits them.
Cheers and safe trading,
Chris
