Interesting Article for starters....

How to Move Beyond the Possible Into the Realm of Probable Where the Fruit is Profitable The probability of your success in any particular trade or series of trades is dependent on how you use your charting program, technical indicators, money management and how you mentally manage your emotions. Understanding what your indicators are telling you is another key point. Study the formulas and compare the differences between MACD, CCI and Stochastic indicators of the same length. Look at them visually as well as mathematically. Visually look at the differences between a normal, exponential, smoothed and weighted indicator. Study until you know what each indicator is telling you. My mentor made me "hand calculate" all the indicators so I learned what each was telling me in advance of the next market move. One interesting concept is to actually calculate a few bars of these indicators from real data in order to truly understand what the indicator is doing and how it reacts to gaps, low volatility and regular price swings. Be sure to run the calculation until you lose a big bar as well. This skewing factor will let you know why many people distrust indicators. They do not understand the limitations of indicators in certain volatile market conditions. All indicators are derivatives or second tiered smoothing of price action. Inherently, all indicators are lagging in one way or another. It is important to understand how they relate to price, potential future movement of price, and how they are affected by past price spikes. We do provide you with a non-lagging indicator (from my nuclear power days) for added accuracy. We tend to trade by watching only our indicators. Watching price only, you can become hypnotized by the noise and miss the real moves. I consider the following four points whenever I am about to make a trade. The number of indicators moving or about to move in my direction. The angle and rate of change of these indicators. The position of the indicators above or below 50% or the 20/80% level for oscillators. The likelihood of continuation based on approaching Support and Resistance, length of previous move and the time of day. Here is a vital key to remember: If you see three indicators moving in your direction, just say to yourself "1, 2, 3, Go". It is as simple as that.