A human being finds it difficult to stick to a certain plan, period.
A robot that calculates 1+1 remains doing this until it's turned off.
Indicators are used to assess an asset and forecast financial or economic trends.
An indicator is a mathematical computation based on the price or volume of an asset in the context of technical analysis. These are interpreted in order to estimate future pricing or get information about the current price action.
Finally, indicators are employed to obtain further confluence by filtering away certain particular uncomfortable "market states" - so far, the formalities.
So, what exactly are indicators for?
To begin with, indicators can assist in determining the present market environment of an asset:
Is the market trending, ranging, or consolidating?
What is the volatility of that market?
So, why does it matter to know what the market environment is like, or why define it at all? To measure your edge and the validity of your pattern.
Let me explain. The only way you can measure something is by doing the EXACT same experiment over and over again.
If you're drawing a trendline, it is ALWAYS different than the trendline you drew last week in the live markets. (It's either more horizontal or vertical) If you're using a Hull Moving Average, which I use a lot, the trend is either up or down. (It's repeatable and always the same)
Let's provide another example because understanding this concept will have the largest impact on your trading!
I am a person that trades both manually and based on automated trading systems.
For the few that are not enrolled with us, trading with indicators is the key to keeping things mechanical and the same for everyone. But with manual trading, you do have a choice... with automated trading, you don't have one.
Trading robots cannot think like us, they are extremely stupid and you have to tell them EVERYTHING. Thus, while building for instance a trendline break system, you can waste months on defining a trendline, or you just simply use an indicator such as the Hull Moving average. and be creative to figure out a different way of getting the same type of setup.
Speak to you soon!