The Problem With Too Many Indicators
A veteran macro trader once told a young assistant something I’ve never forgotten: “If you take away all my indicators and leave me one clean chart with price and volume, I’ll still know what to do. If you give me twenty indicators, you’ll slow me down.” That line sums up why nine out of ten retail traders struggle with technical analysis. It’s not that charts don’t help. It’s that the way most people use them puts speed bumps in front of every good decision. Indicators become a shield from uncertainty rather than a tool for framing risk.
Open YouTube on any given evening and you’ll see thumbnails promising miracles: a “MACD secret,” a “Bollinger Band hack,” an “RSI divergence that never fails.” Newer traders stack these on their screens and wonder why their results are erratic. The reality is uncomfortable: technical analysis isn’t a crystal ball. At its best, it’s a way to turn messy price action into a structured decision with a defined risk, an if–then plan, and a clear exit. Used that way, it’s powerful. Used as fortune-telling, it’s a slow leak in your P&L.
Indicator Stacking and Lag
The trouble starts with indicator stacking. Each tool is a derivative of price and/or volume, so by design it lags. That’s fine if you’re using it to confirm structure or to time an entry inside a known trend. It’s a problem if you’re waiting for five lagging tools to sing the same tune before you act. By the time they do, the move that you should have captured has already ended. I’ve seen traders turn a clean higher-low into a late chase because they were waiting for the “perfect” alignment of their RSI, MACD, and stochastic wiggles. The alignment came—“at the right time”—right before the pullback.
Thinking Like a Professional
Professionals look at the chart differently. They don’t ask, “What is the indicator saying?” They ask, “Where is the risk? What’s the context? What’s my plan if I’m wrong?” Context awareness is everything. Are we in an expansion or a range? Is breadth supporting this move or diverging? Is there a higher-timeframe level nearby that will absorb liquidity? What’s the character of volume on up days vs. down days? These are not decorations on a chart; they are the map’s legend for movement in the unknown terrain of the market.
The Useful Core of Technical Analysis
If you strip away the noise, the useful core of technical analysis is small and robust. “Simplicity is the ultimate sophistication.” — Leonardo da Vinci. A couple of moving averages to define bias (a 20-period EMA for swing speed, a 50-period for position context) can be helpful—not as signals, but as a way to orient yourself. Simple price structure—higher highs and higher lows in uptrends, the opposite in downtrends—will help you more than most fancy oscillators. Horizontal levels from obvious swing points matter because everyone can see them; that’s where liquidity resides in the form of orders. Volume tells you whether a breakout is being sponsored or simply drifting. None of this predicts the future. All of it helps you assign probabilities and size your bets.
Evidence From Research
A quick note from the literature: One classic paper tested two of the simplest and most popular rules—moving-average and trading-range break—on nearly a century of Dow data. The exact article is “Simple Technical Trading Rules and the Stochastic Properties of Stock Returns” by William Brock, Josef Lakonishok, and Blake LeBaron (1992, Journal of Finance). The authors reported that these rules generated returns inconsistent with several standard null models, though interpretation depends on assumptions and the sample. This is a good reminder: even when rules appear to “work,” robustness and risk management matter more than cherry-picked signals.
Wiley Online Library JSTOR
A Professional’s Five-Part Decision Frame
Every durable strategy I’ve seen from a professional desk fits a five-part decision frame:
Bias: What is the predominant direction on the timeframe I’m trading? If I’m a swing trader, is the daily trend intact? If I’m intraday, what is the session bias? Bias isn’t a permission slip to buy; it’s a lens for reading action.
Setup: What structure do I need to see before I’m interested? Examples: a consolidation near highs, a pullback into a rising 20 EMA, a reclaim of a prior breakdown level. The setup tells you where you’re hunting.
Trigger: What precise event tells me it’s time? Examples: a break and hold above the base, a strong close through a level with volume, a failed breakdown that snaps back through the range. Triggers keep you from guessing.
Risk: Where am I provably wrong? The line in the sand is not “when it feels bad”; it’s a price that invalidates your hypothesis. That’s your stop. Without this, everything else is theater.
Management: How will I size, scale, or exit? Fixed fractional risk, partials at measured levels, a trailing stop below a rising swing low—whatever it is, it’s written before you click buy.
Less Is More
Notice what’s missing: “Wait for seven indicators to agree.” Professionals use indicators like a carpenter uses a spirit level: to check alignment, not to design the house. They’re supplements to structure, not substitutes for thinking.
A story I hear often from profitable traders goes like this: “I used to run six indicators. When I took five off the chart, my trading improved.” Why? Because fewer inputs force you to pay attention to cause and effect which actually drive any market. Did the breakout hold on volume? Did pullbacks get bought quickly? Did failed moves reverse sharply? You start to recognize behavior, not just signals. Behavior always repeats because it is based on incentives and biases, not because an indicator flashed green.
The Psychological Edge of Simplicity
There’s also a psychological edge to simplicity. When your chart is crowded, your brain hunts for confirmation—and our brains are wired to find what we’re seeking. It will find it somewhere, on some timeframe, in some panel. That makes it harder to cut a loser and easier to rationalize a hold. Clean charts make your risk line obvious, and that clarity shortens the lag between “I’m wrong” and “I’m out.” Over a year, that difference compounds in a positive way you can’t even imagine.
What to Keep on the Screen
So what should you actually keep on the screen? Price. Volume. A small number of reference tools that help you measure what you already see. A single moving average to keep you honest about bias. An ATR or simple volatility cue so you don’t set stops inside random noise. Levels drawn from highs and lows that obvious eyes will see. If you’re a data-driven trader, add a breadth or relative strength tool to know whether your stock is leading or simply being carried by the tide. But every tool must earn its place on your terminal by answering a question you actually ask; the moment it becomes wallpaper, remove it.
Another Study Worth Knowing
One more study worth knowing: For currencies, a well-cited paper used genetic programming to search for profitable trading rules across major FX pairs and then tested those rules out-of-sample. The exact article is “Is Technical Analysis in the Foreign Exchange Market Profitable? A Genetic Programming Approach” by Christopher J. Neely, Paul A. Weller, and Robert Dittmar (1997, Journal of Financial and Quantitative Analysis). They documented economically significant out-of-sample performance for several rules—again, the lesson isn’t that any indicator is magic, but that disciplined rule design, testing, and risk control can extract signal where many see noise.
Cambridge University Press & Assessment JSTOR
Journaling: Turning Observation Into an Edge
This is where journaling turns technical analysis from a lecture into a lab. If your notes say, “Breakouts that close above the base with volume and hold the next day tend to follow through,” that’s a great finding you can trade. If your notes say, “RSI crossovers made me late five times out of six,” that’s a finding you can stop paying for. Over a month, patterns emerge. Over a quarter, rules emerge. Over a year, an edge emerges—but only if you’re testing the behavior around structure and risk, not just the flicker of lines.
A Simple Experiment
A quick experiment can reset your relationship with charts. For the next ten sessions, trade with price, volume, a 20-period EMA, and nothing else. Before the open, mark two or three levels you care about and write down the behavior you need to see: for example, “hold above yesterday’s high on rising volume,” or “pull back to the 20 EMA with two shallow candles, then reclaim.” Define your stop in writing. At the close, grade the plan, not the P&L. You’ll feel exposed and vulnerable at first—no indicator blanket to cover insecurity. Then you’ll notice you’re less reactive and more confident, because you have fewer variables to debate and must play what’s true in the market.
Indicators Are Not Worthless—But They Must Earn Their Place
None of this means indicators are worthless. A well-chosen tool can keep you from fighting trend or chasing weak breakouts. But, as noted earlier, tools earn their keep only inside a clear plan. If you can’t express in one sentence why an indicator is on your chart—what question it answers—you’re carrying dead weight. That weight shows up in late entries, crowded exits, and most often in hesitation. Markets punish hesitation badly.
The Final Word
If your goal is consistent profitability, not occasional brilliance, treat technical analysis like a craft, not a codex. Every element on the chart should do one of three jobs: frame context, define risk, or trigger action. Everything else is decoration. The market doesn’t pay for decoration; it pays for disciplined decisions repeated under pressure.
When you finally pare down to the essentials, something interesting happens. You stop arguing with the market about what it “should” do and start listening to what it is doing. You’ll see that the best trades rarely feel comfortable—they look obvious only afterward because the structure was clean. You’ll exit losers faster because the invalidation was clear. You’ll hold winners longer because your management plan wasn’t a hope, it was a rule. That’s the quiet edge that separates traders who last from traders who scroll.
If you want a place to start, start here: choose one timeframe to make decisions, one timeframe to confirm context. Mark your levels. Decide your risk per trade. Use a single moving average for orientation, not permission. Take twenty trades with the same rules and write everything down—setup, trigger, stop, management, outcome, and what the market did immediately after you exited. Review the set on a weekend without looking at the P&L. Keep what repeats. Cut what doesn’t. That is technical analysis as professionals practice it: not prediction, but probability with discipline.
And when you’re ready to layer in something more, add it because it answers a specific, valuable question—not because it makes the chart look smart. If it doesn’t help you act faster, enter cleaner, define risk tighter, or manage better, it doesn’t belong. Remember the mentor’s line: with one clean chart, you’ll still know what to do. With twenty panels, you’ll hesitate. In markets, hesitation has a price.
If this resonated, continue with our deep dives on building a simple risk framework and journaling your edge. You don’t need more indicators; you need a better process.
