Indicators are often considered as blessings for new traders. The professional traders in Hong Kong rely on the indictors reading to filter out the false spike of the market. Things might seem easy but when you use them in the real market, you will find many problems.
The majority of new traders don’t know the proper way to use the indicators. They use too many indicators in the hope of finding the best trades. But you have to understand the fact that every indicator follows unique parameters.
So, if you want to find one good trade, it’s better to rely on a single indicator. Let’s learn a few amazing techniques which will help you to use the indicators effectively.
Use indicators on the daily time frame
Lower time frame trading is only for experienced professionals. Unless you have extensive experience in the retail trading business, you should never trade the 1 hour or lower time frame. The new traders often use the SMA and Bollinger band indicator to trade the minute 30 and 1-hour time frame.
At times they might find high-quality trade setups but considering the long term consequences, they are most likely to lose trades. Use the indicators on the daily time frame since it will help you to find the best trades. Though you will have to become a position trader still it’s than losing money on low-quality trades.
Learn its use in the demo account
Before you start to use any indicators make sure you back-test your trading strategy in the demo account. Instead of the indicator in your trading platform and analyzing the readings at the different market conditions. Based on the different readings, you have to craft a unique trading strategy that will help you to make a better decision.
Unless you feel confident with your demo trading performance, you should never trade the market with real money. Consider the demo account as your learning ground. Test different settings of the indicators and create a stable trading strategy.
Use different settings of the indicators
Never think the default settings of the indicators will work in the Forex market. You have to test different settings with different periods. For instance, consider the RSI indicator. It allows the retail traders to find the overbought and oversold condition of the market.
If the reading of the RSI stays above the 70 mark, you need to look for a selling opportunity. Similarly, if the reading stays below the 30 mark, look for buying opportunity. Most of the time the RSI has 14 periods.
Tweak the settings and see how it works in real life. Make sure you demo to test the new settings of the indicators to fine-tune the trading strategy.
Using it the lower time frame
Though lower time frame trading is extremely risky, some experienced traders use the indicators to trade the lower time frame. For instance, you can use the 100 and 200 days SMA to find the dynamic support and resistance level. But you should never execute any trade in the dynamic levels without having any price action confirmation signal.
Take your time and train yourself properly so that you can make the best decision in trading.
Manage your risk exposure
Those who have mastered the use of indicators can easily make a huge profit from this market. Some of the new traders often become aggressive after creating a balanced trading strategy. This is where they make the biggest mistake in life.
No matter which indicators you use, you should never risk more than 2% of your account balance. Master the art of risk management technique so that you can make a profit regardless of the market condition. Try to find a high-risk reward trade setup since it will significantly boost your trading performance.
Use logic when you execute the trade with indicators. Stop relying on emotions because it ruins your trading career.