Indicators work like chart if you learn to use it in a professional way. The naïve traders are always using the indicators in the wrong way and losing money. Some retail traders often purchase custom made indicators and try to make a big profit from this market. But if you do some research, you will learn that trading the market based on indicators is a big mistake. The traders should use the indicators as trade filter tools. This is where things take turns. People start using too many indicators with great hope that will allow them to find the best signals. But in reality, it makes the trading condition much worse. Read this article if you want to learn the perfect use of the indicators.
The first thing which you should consider is the settings of the indicators. Changing the default settings and using it to trade the major time frame is a big mistake. You never know which trade will hit the potential stops loss. And if you change the settings and start using its reading without backtesting it, you are going to lose money in most of the trades. However, you can change the default settings of the indicators but make sure you are not using any insane settings. People often change the period of the RSI to 5 only to get sharp. Just like you can always alter the value of popular indicator but you must know the correct data to place.
Do you know the consequences of using too many indicators? Those who are using too many indicators are losing all the trades. Try trading demo app with too many indicators and you will fail to make a consistent profit. The retail traders are always losing money since they don’t know the purpose of the indicators. Indicators should be considered as your trade filter tools. If you start relying on the indicators blindly you will forget to analyze the price data. Without analyzing the price data it’s impossible to filter the best signals. First of all, you have to get a valid trade setup. And after that, you need to look for the quality of the signals. So, make sure you have a clean chart or else you should not use any indicators.
There are some people who will suggest using the indicators in the lower time frame. But we always recommend the retail traders to use in the higher time frame. If you use the indicators reading in the lower time frame, you will not get any accurate data. Most importantly, you will always have to deal with uncertainties. As a currency trader, it’s your duty to minimize the losses and look for potential trade signals in the higher time frame. If you can do the math correctly you will understand why you should trade the market in the higher time frame.
News trading is the most difficult task for retail traders. If you want to make some serious profit by trading the major news, you must use the indicators in a higher time frame. For instance, using the 100 day SMA to trade the major news is a very effective way to make money in a short time. Set the pending orders near the 100 days SMA and you will be able to make a big profit. But such a strategy often fails and you might have to lose money. So, try to use proper money management techniques so that you can protect your trading capital and save yourself from losing orders. Take your time and try to use the conservative trading method to develop your skills. And stick to long term goals if you really want to trade the high impact news.