Technical analysis indicators are tools to provide the trader a better perspective (“edge”) on market trading action. They are a resource to quantify price movement into a format that one feels comfortable with. In essence, it is a way to qualify market emotion in a venue that allows for proper decisions to be made in a difficult and chaotic environment. To be successful it is imperative that one understands the basic concept of price action trading. Most technical analysis tutorials miss this point.
As I have stated over and over again (ad-nauseam), price action indicators are all based upon a few market inputs. That is things like open, high, low, closing price, volume, and open interest are the basic components of all technical market indicators. There is little else. The choice of technical indicators is like deciding what pair of shoes to buy. The concept is that they all fit on your feet. The conundrum is what feels the most comfortable!
Price Action Indicators
My point is that price action indicators are really all generic. It is a traders decision in which one makes them confident. If you do not trust your technical analysis tools, you cannot succeed.
There are indicators that should be used for market trend analysis. That means if you want to follow trends in a longer time frame and catch a big move (ie. swing for the home run) follow those types of indicators. If you want to trade shorter term moves in a market congestive phase chose a different shoe.
Price action trading is a daunting task. Since the input data to all the indicators are basically the same, it is most essential to find one that works for you. Not the other way around. There is no Holy Grail of trading. But being confident in the tools you use will make a huge difference between success and failure.