Mistakes associated with indicator based trading strategy
Everyone knows trading is one of the most lucrative professions in today’s world. Sadly only 5% of the retail traders can make a profit in the Forex market. Majority of the investors are losing money since they don’t understand the nature of this market. Being the largest financial market in the world, it is full of surprise. Unless you educate yourself properly and create a balanced trading strategy, it’s really hard to make a consistent profit.
The novice traders always love to trade the market with indicators. They think this is the best way to find great trades. They overload their charts with too many indicators with a hope to find the best possible trade setups. But when you take readings from too many tools, it’s really hard to predict the price movement of a certain asset. In this article, we are going to highlight the mistakes associated with indicator based trading strategy.
Using too many indicators
You need to limit the number of indicators installed in a specific chart.
The pro traders hardly use more than two indicators. Indicators are nothing but trade filter tools. It only gives you the data which determines the quality of the trade setup. So, if you take reading from more than two indicators, you will never understand which indicator is showing the actual market condition. So, limit the use of indicators to avoid an unnecessary hassle in the trading profession.
Not having enough knowledge
Before you use any indicator, you need to know its use. Trade demo account with your desired indicators and tries to understand its functions. Never start to trade the real market without having a precise knowledge of your trading tools. Try to think like the professional traders at Rakuten. They always take advantage of the free demo account and develop their trading strategy in a risk-free environment. You need to understand the key features of any indicator before you rely on its reading.
Taking too much risk
Learning to use the indicator doesn’t mean you can avoid all the losing trades. Even professional traders don’t have this power in the investment business.
No matter which trading strategy you use, you should never risk more than 2% of your account balance in any trade. Becoming a successful trader in the Forex market requires time. You can’t become a millionaire without knowing the risk factors in the trading profession. At the initial stage, never risk more than 2% of your account balance since it will protect your trading capital in the long run.
Trading the lower time frame
The indicators need to be used in a higher time frame. If you use it in the 1 hour or lower time frame, you will never get any accurate signals. Some of you might say a higher time frame trading strategy is extremely boring and it’s true. You can’t make a profit in the Forex market with emotional excitement. You need to have the potential to control your emotions. Always try to follow the conservative trading approach since it will help you find quality trades at the complex market condition.
Modifying the value of the indicators
The intermediate traders love to do experienced with indicators. They modify the default settings of the indicators and start trading the real market. This is a very big mistake in the Forex market. If you change any settings, you need to backtest the trading strategy in a demo account.
Never trade the real market with an unverified trading strategy.
So, is it good to change the default settings in any indicators? The answer greatly depends on the trader’s personality. If you want to fine-tune the readings, it’s always better to try new settings but that needs to be done properly. So, be very careful when you change any settings in the indicators.
