Â Â Â Â When it comes to technical indicators, traders tend to gravitate toward the complicated side of their trading lives. The K.I.S.S. methodology seems to have been replaced by the M.I.H.O.P. (make it hard on purpose) strategy, and the ending analysis becomes chaotic at best. So, when asked that never-ending question, â€œWhat is one indicator that you prefer,â€ my answer unconditionally elicits a â€œNO WAYâ€ response.Â Why? Well, they were expecting something like a divergence indicator or a complex stochastic formula, but instead they got:
Â Â Â Â Hey, thatâ€™s just a simple line! Yes, but itâ€™s a simple line with power!Â How, you ask? Because of all the trading indicators you ever will find, this one allows you to draw trend lines, to find resistance and support, to spot buyers and sellers, and it signals the best of entries and exits. Â This should be your KEY indicator! Â So, letâ€™s talk about this and see why â€œsimplicityâ€ trumps â€œcomplicatedâ€ on any day of the trading week.
Â Â Â That â€œsimple lineâ€ becomes a trend line when connecting two or more price points on your chart. Price can move up, down, or sideways. Extending into the future, this line acts as either support or resistance. When you have two higher highs and two higher lows, the trend is moving up, and with two lower highs and two lower lows, the trend is moving down. Â The third point usually confirms the trend. Â Here are charts that I have drawn of each.
Â Â Â Â Â A quote of mine states, â€œTrading is simple, but we, the traders, insist on making it complicated.â€ Â If these words speak to you, then maybe itâ€™s time to remove some of that confusing â€œindicator clutterâ€ from your trading screen and opt for your often-overlooked friend, the humble Simple Line.Â Besides, itâ€™s easy to draw!Â Have fun, and I wish you much success with your trading future.
Todd Mitchell is the CEO & Founder of Trading Concepts, Inc. He's been trading since 1994 and has mentored over 12,000 traders from Wall Street to Main Street. He's an expert at developing strategies for creating more consistent daily, weekly and monthly income.
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