Technical Indicators - Will Too Many Kill a Good Trade?

As a given, every trader will develop their own set of demons sooner or later. Some of us are able to see our problems right away and learn from our mistakes.Some of us keep trading in circles until we don't know what's right or wrong,or why we keep losing money. Over the years the biggest problem I've seen with new and established traders is what's called Analysis Paralysis. Could this be your demon? Here's what it looks like: You've just read that article about the 'forgotten indicator'.This one is the 'secret' that no one wants you to know about - especially those Floor Traders that make a living off of Your bank account. You scan through the 30 or so technical indicators included in your real time quote service and 'find' that technical indicator you just read about. Wow!Where has this been hiding - you ask yourself, chuckling with dollar signs dancing in your head. You quickly pull the 'secret technical indicator' up on your chart and the colors come alive.You just know this is what you've been missing all along.This is the answer to your trading prayers! That new Porsche can't be far away... Rolling back in your padded office chair you take a proud look at your trading screen - you're hypnotized by the moving lines and colors. There in front of you is your candlestick chart with the brightly colored bars set against a grid pattern. Your blue and red converging and diverging moving averages are clicking right along. You've settled on blue and red after experimenting with a dozen different colors .You're still not sure if one of the lines should be dotted or dashed. Below the chart you've inserted those thick colored volume bars - can't miss the volume now. Below that, you've placed a slow stochastic indicator. The colors have been changed so you can see it from the 'other' trading indicators. Boy THAT looks Good ! Then of course below that is your MACD with still more colors and the CCI and maybe the ADX. Last week you fooled around with Bollinger Bands and even tried Keltner Bands. Got rid of those and went back to the double moving averages. Parabolic SAR looked like a neat technical indicator - those little blue diamonds showed up great against the colored chart background. For now you have settled on light grey as a background color after trying tan, black, green and white . White - that was too blinding. You decide to scrap the Parabolic SAR - can't justify what it is doing with the other indicators. Oh well ... Does all this sound familiar? In your quest to find the 'Holy Grail' you've created a monster. You spend all of your time trying to get all of the indicators to agree on a trade direction. When two of the indicators give a buy the others might indicate sell. By the time you get all of the indicators giving what you think is a definite trade signal - the action is OVER. You enter the trade and almost immediately it goes against you. You lose money - again. What's the problem? The first problem is you're using way too many technical indicators. Keep in mind that just about every indicator is a Lagging Indicator. By the time you see an agreeing signal to buy or sell from all the indicators you are using,- it's too late. Price action has moved on and the technical indicators are trying to catch up. Your second problem is confusion of color. Your mind is trying to decipher all this split second information coming across your charts as well as attempting to figure out all of the color combos and multitude of indicators. We are spoiled by all the colors available on our charts and think that some how more color will help us trade better. Not so. So what's the solution? Keep it simple. Keep it clean. Here is how I set up my charts: I trade the emini Russell and emini Dow on one and three minute charts. I set my up bars in white and my down bars in black,on a light gray screen - no grid. The only indicators I use are 8 period simple moving average - white dotted line and 16 period simple moving average - black solid line. The moving averages are overlayed on my chart. Below my chart is Slow Stochastics set at 15/5/3. %K is a white dotted line %D is a solid black line. Upper and Lower bands are heavier black dotted lines and at the 50 mark ( center line) I use a yellow solid line. That's it. Sound kind of boring? Try this chart set-up and see how much easier it is to trade.