Pprice movements in forex trading always fluctuate in a relatively short time. Such movements enable technical indicators to read patterns from prior prices as well as predicting the next price movements.
When you have spent some time observing price movements on the chart, you will get the feel that price movements in forex trading always fluctuate in a relatively short time. Such movements enable technical indicators to read patterns from prior prices as well as predicting the next price movements, because in anything that is random always exists patterns with repetitive tendencies. No matter what, history will always be repeated, including in regard of price movement in forex trading.
Continuously changing market makes many forex traders rely on technical analysis to trade with. You may be one of them. But there is one thing you need to know; it is that all indicators, basically only gives probabilities on how market acts. Okay, the probabilities given by your ultimate indicator may be high, but no matter how high it is, there is no 100% certainty, is there!? It could even be said that no one knows for sure about market tendencies.
Maybe, if you are one of the big boys, you may have the power needed to influence the market. But as long as you are a just one of the good-old-traders, market movement is a given, and whether you want to or not, you have to follow that in order to profit from it. Well, related to the way market condition continually changing, if you want to be successful, you may have to use several indicators or arrange a trading strategy based on combination of several indicators in order to read the market more accurately.
Why several indicators? Why don't I simply use one reliable indicator? Well, as you very well know, each indicator has its own weakness. Also, although each indicator usually gives blatant signal for one kind of market condition, but it may give false signal in different market condition. Therefore, you would do better by tailoring the indicator you use with the ongoing market condition.
For better understanding, I'll give you an example. For when the market is in sideways, I usually use combination of SMA 200, W%R, and Parabolic SAR in 15M timeframe. Of course, in such circumstances, I place relatively low Take Profit (TP) level as well, just about 10-30 pips, according to the ongoing sideways range. Meanwhile, if the market is trending, I usually make use of Fibonacci Retracement in addition of trendline in 4H timeframe with relatively higher Take Profit level. In that event, I generally employ fibonacci levels as bases for TP and SL (Stop Loss).
Those indicator combinations are just examples. You may have your own alchemy that works better. What I want to emphasise here is, recognize characteristics of the indicators (indicator combination) that you have been using, so that you will not be trapped by false signal that appear because you apply it in unsuitable market condition.
Maybe, now you are thinking that having to understand many indicator is sucks; just one is okay. Well, I am not going to push you into mastering all market condition. There is no pressure for forex traders to enter the market in all market condition. So, you could just leave the market when it becomes uncomfortable. Say, one day the market is sideways, and your trusty indicator is unreliable in such situation; in that case, you'd better stay away, just observe things and wait till the condition changes. Only after you feel the market become attractive again and the strategy you are using is able to give strong signal, you may enter the market. Remember, successful traders are ready to sit out for a while if the market is considered too risky or uncertain.