RSI, Stochastic, MACD and Bollinger Bands

Do RSI, Stochastic, MACD and Bollinger Bands Work?

Most new traders will have come across all of the overbought/oversold style indicators that are out there and think that they are the edge. I remember back when I first started I read up on “the theory” behind various indicators and thought that they were. It’s not uncommon to believe something that is repeated so many times and at so many different places. These repeater people are clearly just regurgitating something that they really don’t know much about, well they know about the theory of course but it is real life application that is important. RSI, Stochastic, MACD and Bollinger Bands are just some of the indicators I once tried and I can tell you from experience that they will all just add mess to your charts. There will never be anything cleaner or superior to learning how to read price action. It has no lag, it doesn’t repaint, and it gives you the most clarity you will ever have along with the ability to go with the herd and stay with the trend.

Why Does Everyone Talk About Them?

Since so many places online talk about the RSI, Stochastic, MACD and Bollinger Bands like they do exactly as the theories suggest, I can only conclude a couple of most probable reasons for it. The first batch are just information websites who simply write down what the theory is behind how each indicator is calculated and why. Unfortunately contained within the theory of each indicator is a persuasion about how it can work to give you trade decisions. Usually this is through overbought/oversold conditions which most of the time tells you to trade against the current trend which just ends up being suicide long term. The next batch of places online talking about indicators like the RSI, Stochastic, MACD and Bollinger Bands are people just trying to fill their website with content and talk about things they probably don’t even understand. I prefer the first batch of people because they are just relaying information and aren’t necessarily telling you that they work, the second batch though are usually giving you trading strategies around them without actually trading successfully with them for years first. That just plain annoys me and gives a bad name to all Forex education websites.

Can I use RSI, Stochastic, MACD and Bollinger Bands?

I can honestly say that you shouldn’t even bother with indicators like RSI, Stochastic, MACD and Bollinger Bands, there is nothing that you need beyond the ability to read price action and an understanding of supply and demand. That said, you could use any indicator that draws your attention to a price action based event better than price itself. I no longer see how this is possible but I can understand the idea. If I were you though I would focus all of my attention on the topics of price action, support and resistance, supply and demand, risk:reward, and money management. Stay away from indicators like the RSI, Stochastic, MACD and Bollinger Bands because they are a waste of your time. You will thank me later and if you want to get started on all of the important topics I just mentioned you can do so here at Start with the Forex Basics section and complete all of the lessons there, then go through all of the Trading Strategies lessons, and finally get Free Membership to watch the Free Forex Video Course. After that you should be on the right path and not looking at RSI, Stochastic, MACD and Bollinger Bands anymore.

What Qualifies Me to Give You Advice?

Anyone can write anything they want and these days the internet is actually full of complete rubbish, not just in the Forex field. There is so much affiliate marketing aimed at trying to make money that it has people promoting things they have no idea about. When it comes to Forex though I have been trading since 2005 and teaching people since 2008 so I have a good idea what I am talking about. In the early years I did try the RSI, Stochastic, MACD and Bollinger Bands, plus many other indicators even, always hoping for an edge. The fact is that they all work every now and then and they do give you an amazing false hope when looking at them historically. In reality though they just push you towards counter-trend trading which will make you lose money. Learn to read Price Action and start following the trend, let the herd take you to profits swiftly and directly so you don’t pull all of your hair out. With some sound risk:reward and money management you can be profitable with the Forex market and give yourself a job for life that you can do anywhere, and at any time!