This article is taken from the Forex Journal (March 2008 issue).
The author, Brandon Wendell, has appeared as a guest on CNBC Asia's Cash Flow and conducted special seminars for CNBC staff on technical analysis of the financial markets. Brandon was also an industry expert speaker at the Asia Traders and Investors Conference 2008.
- Brandon Wendell provides new ideas on how to interpret an old indicator. Do you know how to successfully interpret and use Welles Wilder s RSI? Learn new interpretations of the RSI in this article.
Many traders look to technical indicators for clues as to where price action will be moving in the future. There are many problems associated with this approach. First and foremost, technical indicators lag current price. The indicators are created from data that is compiled from where price has been at some point in the past, the rate at which it is changing, and perhaps use volume as an additional filter. Technical indicators are simply a mathematical way of analyzing and representing price action and offering a different perspective of what price is doing. A trader should never rely exclusively on an indicator for a buy or sell signal. However, when used in conjunction with price behavior analysis, a trader can gain confidence for entries and exits as well as identify opportunities as they appear. Technical indicators should be used as a decision support tool.
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