If you are looking for a short answer to this question, you will not get one. The technical indicators mean different for different people. Some people blindly use a technical indicator or combination of technical indicators without having any idea about the market and the other factors influencing the price. Some use them just for reference while using fundamental analysis as the primary method of analyzing the market.
Technical indicators are certainly worth them if used the correct, and disciplined way. But, it’s going to rather act against your odds if you use them incorrectly, or at the wrong time.
So here, we are not talking in depth about the best technical indicators, we’re talking about the best and worst possible way to use them, and when to completely avoid the technical indicators.
Where to use, avoid technical indicators?
If you did not know the job of a technical indicator, it is to show us the potential movement of the market in the near/farther future by analyzing the previous data and market movements. But, the market is mostly driven by fundamental factors, like government announcement, media coverage, and so on.
In case the market is moving solely due to these factors, the traders using technical analysis will find it completely unpredictable and unreasonable. You will get a ton of false signals and lose a significant amount. You have to understand that the technical indicators are nothing more than bots. They are always going to show you signals. You have to decide when to take those.
We can take Bitcoin, for example. Within it’s return trip from 30000 to 60000, it has given uncountable false signals. That’s because if it’s going up, it’s going up, no matter what your technical indicators show you.
Fundamental analysis is more or less always there in the game, without any respect to the technical indicators. Technical indicators work the best when fundamental factors are less involved in the market.
Worst indicators to use during fundamental-factor-dominance
Bollinger bands is undoubtedly one of the best indicators out there. But, if you are the biggest fan of the indicator, you might want to hit your breaks immediately after getting any kind of fundamental smell. If you use the Bollinger bands, you most likely use them for the oversold and overbought regions. But, if the market is to go up, it will keep going up, no matter how many times, or up to what extent it gets overbought.
RSI is one of the best indicators too. And you can read the above paragraph once more. It’s all the same.
Moving Average Convergence Divergence is the favorite indicator for many people, and that for a reason. But, during Fundamental-factor- dominance, if you take each and every MACD signal, you are going to get screwed. If the fundamental factors show the market’s potential direction to be up, you should only take bullish MACD signals, and vice versa. It can be more efficient than any other indicators during such period.
It’s just clear that technical indicators are just as much worthy as the way you use them. If you are able to distinguish when and when not to use technical indicators, you are going to get a healthy win ratio.