What is the best Forex technical indicator?

Now for the fun part: how profitable is each technical indication by itself？

After all, forex traders don't add technical indicators to their charts only to make them seem nicer. Traders are in the money-making industry!

If these indicators produce indications that not transfer into a lucrative bottom line over time, they are just not the right choice for you!

We decided to backtest each technical indicator separately for the past 5 years in order to provide you with a comparison of their usefulness.

Backtesting entails comparing the parameters of indicators to last price behavior in the past.

In your future studies, you'll find out more about this. Take a look at the parameters we used for our backtest for now.

We tested each of the technical indicators separately on the daily time frame of EUR/USD during the last 5 years using these criteria.

We trade one lot (100,000 units) at a time, with no stop losses or take profit points in place.

Once a new signal emerges, we just cover and switch positions. This means that if we were long when the indicator told us to sell, we would cover and open a new position.

We also assumed we were well funded (like we were taught during our Leverage lesson) and began with a $100,000 hypothetical balance.

We included total pips secured/lost, as well as the maximum drawdown, in addition to the actual profit and loss of each method.

Let us just reiterate that we DO NOT RECOMMEND trading forex without a stop loss. This is purely for demonstration purposes! Now, let's look at the results of our backtest:

The Ichimoku Kinko Hyo indicator did the best on its own during the last five years, according to the statistics.

It made a $30,341 profit, or 30.35 percent profit. Over the course of five years, this equates to an annual growth rate of slightly over 6%!

Surprisingly, the remainder of the technical indicators performed far worse, with the Stochastic indicator returning a negative 20.72 percent.

Furthermore, all of the indicators resulted in significant drawdowns ranging from 20% to 30%.

But, this doesn't imply that the Ichimoku Kinko Hyo indication is the best or that technical indicators in general are ineffective. Rather, this demonstrates that they aren't really useful on their own.

Consider all of the martial arts movies you saw as a kid. No one, with the exception of The Rock and the People's Elbow, depended on a single maneuver to defeat all of the evil guys. To get the Job done.The Rock employed a mix of movements.

The forex market happens to be analogues. It's an art form, and as traders, we must learn to use and mix the resources at our disposal in order to devise a method that works for us.

This leads us to our next lesson: combining all of these signs!