Indicators are one of the most effective tools a trader can use in their trading profession. If a trader learns to use the indicators in a systematic way, he should be able to take the trades without having much trouble. But the problem is, the novice traders don’t want to learn the proper functions of the indicators. They jump into the trading market and expect to make a big profit. Slowly they start relying on too many tools but eventually, it makes things worse.
To use the indicators, you have to follow some strategic rules. Unless you take the trades with fixed sets of rules, you will never succeed as a trader. In this content, we will give you a proper guideline so that you can use the indicator with a great level of confidence.
Types of indicators
There are two basic types of indicators in the Forex market. The leading indicator gives the trader a clear clue about the direction of the market prior to the formation of the trade setup. On the contrary, a lagging indicator gives late signals to the traders. So, based on the functions of the indicator, the trader needs to curate their trading system. For instance, if you use a lagging indicator to scalp the market, you might not get an accurate result. It would be better to rely on the leading indicator as it will help you to improve your decision-making skills.
Selection of the time frame
The traders need to select their time frame in a very strategic way. Unless the traders focus on the critical market dynamics, they will never realize the lower time frame trading method is not that profitable. In fact, the data readings in the indicator are much more accurate when it is taken from the higher time frame. So, try to use the indicators in the higher time frame. However, if you intend to use the indicator in the lower time frame, you should be relying on the multiple time frame analysis. To find more info about multiple time frame analysis, visit the official website of Saxo.
Modify the indicator settings
As a novice trader, you should also modify the settings in the indicators. Without learning to modify the indicator settings, it will be a tough job to make a regular profit. For instance, think about the moving average. You need to change the period in the moving average and sync the indicator to your existing trading system. Similarly, every indicator needs some minor modification. However, if you use the indicators just as a trader filter tool, you might not have to modify the readings in the indicator. It will help you to make the right decision at the right time.
Use it in the demo account
Learning about the core functions of each tool is a very tough task. If you wish to succeed as a retail trader, you must learn to use the indicator in the paper trading account. Never expect to master the proper use of any indicator without using it in the demo account. As you become skilled with the demo trading process, you can start taking the trades in the real market. Never think you know everything about this profession. Take your time and learn to evaluate the market dynamics in a systematic way.
Use fewer indicators
After learning the proper use of few indicators, the traders often overload their chart. But to make consistent profit in the Forex market, the traders need to limit the use of indicators. If you use too many indicators, you are not going to succeed as a retail trader. To protect your trading capital, you must learn to use fewer indicators. If possible study the price action confirmation signal and use it as a trader filter tool. It will help you to rely on few indicators and thus your performance will improve to a great extent.