Are you using too many indicators on Pocket Option?

Technical indicators are some of the most common and important tools used in trading. There is a great variety of them and choosing the right ones is quite challenging.

It may be tempting to use many indicators at once, in hope of obtaining the best confirmation of a signal before placing a trade. The danger here is that your chart may become too chaotic and difficult to interpret a clear signal, making it very easy to lose the right moment to enter a trade. Adding only a few indicators that generate the same information can also be quite dangerous and reduce the accuracy of signals. Picking the right number and combination of indicators is not an easy task and depends on each trader’s preferences, but let’s look at some general things you may consider.

Types of indicators on Pocket Option

Technical indicators are used to evaluate the price performance of an asset and obtain an estimation of its future movement; they are often based on past and current price data, as well as the volume of the asset traded. Traders can interpret signals of indicators to determine whether market conditions are suitable for an entry or exit. There are many different indicators available on Pocket Option, and it’s a good idea to understand the different types to choose the ones that suit your trading strategy the best. You can find all of the indicators available on the platform in the left top corner of your trading chart:

indicator pocket option

You can mark your favorite ones for quick and easy access. Let’s look at the most common types.

Trend indicators help you determine the general direction of the price. While individual price candles on the chart may be somewhat sporadic, trend indicators aggregate and boil down their overall direction into a single line, demonstrating a more clear uptrend, or a downtrend. Some of the most common trend indicators involve moving averages, both simple and exponential, moving average convergence divergence (MACD), Aroon indicator, etc.

Momentum indicators measure the rate at which the price of an asset increases or decreases and hence demonstrate how strong price movement is. They are often used to identify overbought and oversold areas, as well as identify entry points. Some of the commonly used indicators on Pocket Option are the Relative Strength Index and Stochastic Oscillator; the latter is shown below:

Stochastic oscillator pocket option

Volatility indicators demonstrate how wide the range of price of an asset is i.e. how volatile it is. Assets that are volatile can present many different trading opportunities but can also be quite dangerous, as prices can often be unpredictable and turn against your estimations within seconds. Some of the popular indicators include Bollinger Bands and the Average True Range indicator (ATR); they are common tools in trade management and can be used in setting stop-losses.

Which indicator type you will use to spot an opportunity for trading depends on the strategy and trading style. If you are focusing on short-term market movements, you might consider indicators that trace volatility; longer-term market swings may be analyzed with trend-following indicators and strategies. Often a combination of different types of indicators is used for confirmation.

Decide on the number of indicators

choose indicators pocket option

  • Identify your needs. It is important to know why exactly you need indicators; could be to spot a trend, define entry points or manage positions. Perhaps you are using the chart to define entry conditions and only need an indicator for trade management, or perhaps you want one indicator to identify the trend and another one to spot entry conditions. In the end, it boils down to why you need those indicators.
  • Level of expertise. Beginner traders often use more indicators to see a clear signal and understand price action; with time it is likely they will choose specific indicators for every strategy and market traded.
  • The duration of the position. Using many indicators for short-term positions may result in an overload of information and make signals unclear.
  • Understand your own preferences. It is important to practice and understand what kind of chart layout is most comfortable for you. Some traders rely purely on price action or use very few tools of technical analysis; others prefer many indicators on the same chart for more complex analysis. It is important that the chart you set up is easy to read and you can react quickly to new changes or opportunities. Pocket Option allows you to customize chart type and colors, as well as the overall scheme of the interface.
Choose the right indicators

Here are a few things to consider while choosing which indicator or what combination of indicators to use.

1. Avoid indicators that give out the same signals. The use of several indicators of the same type that generate the same information may lead to misleading and redundant signals; this is often called multicollinearity.

2. Complementary indicators. It may be a good idea to use a combination of indicators that work well with each other and that do not provide excessive results. Some traders combine indicators of different types together, for example, a trend indicator and a momentum one; as they give different information about the state of the market, signals from one can be used to confirm the other.

3. Adjust the chart type. Pocket Option offers many different ways of customizing your trading interface and you can always choose the chart type that works best with your chosen indicators. You can likewise tailor and optimize indicators to whatever suits you the best, by for example changing the period of a moving average or choosing the number of trendlines on the Bollinger band indicator. You can always adjust that under the settings of each indicator:

Bollinger bands adjusted pocket option

4. Evaluate. Pocket Option provides you with the opportunity to practice using different indicators on a Demo account, which also allows you to re-evaluate their performance. You can always take a step back and consider what are the disadvantages of each particular indicator, monitor whether it generates false signals under your strategy and whether it signals opportunities in a timely manner.

 

Indicators are an important aspect of trading and technical analysis. They can greatly help you if used in the right way. An excessive number of indicators may lead to confusion on the chart and an inability to grasp the essential, while too few indicators may not be enough to spot the right market conditions. It is quite common to use a combination of indicators and adjust the chart accordingly, which is very easy on Pocket Option.

Do not forget to practice and analyze what works best on a Demo account, and good luck trading!

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Risk Warning: The trading products offered by the companies listed on this website carry a high level of risk and can result in the loss of all your funds. You should never trade money that you cannot afford to lose.

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