All that matters is the confirmation of any signal

Hi,

I'm opening this thread to start a discussion about what tools or indicators can be used to confirm a signal provided by a trading system. This trading system might be a very basic moving average crossing alerter or a more complex system using any kind of indicator.

To give a simple example, let's consider the basic moving average crossing system. We all know that such a system will provide a lot of false signals. Then we can try to improve that system by using moving averages with less lag and less false signals, but still the false signals are part of our trading.

Of course we cannot remove all false signals! Or trading would be so easy ;-)

Well, I would like you to share with other people in this thread your idea about signal confirmation.

There are a lot of trading tools that we can apply when trading:
- volume analysis
- Fibonacci
- chart patterns
- candlesticks
- divergence on oscillator indicators
- market profile

And I'm sure I've forgotten many tools.

Just to give some idea, we could use volume spread analysis to confirm a cross signal from our moving average crossing system. If we see a signal to enter long, can we see in the background some special volume bars indicating that the trend is likely to reverse?

So I hope we will share a lot of ideas in this thread and that we'll all have many things to learn.

Daniel

This could definitely be a very interesting and educational discussion, but imho you must first be willing to recognize that many (if not most) of the tools and indicators currently used for Forex were originally designed for something else entirely (markets or indices other than Forex), and are therefore inherently unreliable to start with.

In addition, there are tools such as Volumes which do not work AT ALL on the retail/bucketshop level, since no bucketshop trader has direct access to the interbank feed, therefore depriving them of any actual data feed containing the true volume and other tick data, leaving only tick data as filtered by that particular bucketshop broker. So you think that you are seeing interbank volume ratios, but actually you are only seeing what your broker wants you to see. Which is essential to understanding why 10 charts from 10 brokers never look exactly the same.

That same basic rule applies to every possible charting tool: if it relies on tick data, then you are already depending on data that you will NEVER have access to on the retail level, you just think you do.

There are some tools which can get around this, such as Fibs, Weekly/Daily Supports, and Consolidation Zones, just to name three, since none of these rely on interbank tick data. Most everything else is not even worth discussing, at least not until they are placed in their proper and respective places, or given direct access to accurate tick data -- and the retail Forex market is not it.