There are many trading strategies available which are used extensively by traders across
the world. Every trader should choose and stick to the trading strategy that is suitable to
him. In addition to the strategy, a trader should be aware of important characteristics of
the markets and trading tools. Following are some of the useful aspects to ponder upon.
Watch the Psychological Levels
The psychological levels play an important role in a trend. These levels are generally
big round numbers like 1, 1.5 100 etc. The significance of these psychological levels is
that they have a knack of playing a spoilsport. The trend can face a resistance at these
big round numbers. Trend can also find the support at the psychological level. You can
use these levels to your advantage by using them as profit targets, entering the trades etc.
Price may not stop at these levels but it can face problem going ahead.
Indicators are Lagging
There are many indicators available to identify the trend. But the problem with the
indicators is that they are lagging. Indicators will help you in identifying the trend but not
at the start or end of the trend. It will identify the trend only after the trend has started.
Most beginners don’t know this fact and trade based on the lagging indicators. One can
only make money consistently if the trend is identified early.
Identify the Trend Early
It is important that when you enter a trade, you first identify the trend. Trading against
the market will surely lose money. A lot of money can be made if you go with the trend.
Many beginners forget the identification of the trend before proceeding analysis. You
will not win every time but you will avoid many losers if you identify the trend first.
Use Multiple Indicators
One of the ways to overcome the shortcoming of the lagging indicators is to use more
than one indicator in tandem. Many indicators can be used constructively for this
purpose. You can use the average directional index which measures the strength of the
trend along with MACD and RSI. Bollinger bands are also early if used with MACD. This way you can confirm that the trend is intact. Based on
this information, you can go ahead with your trading strategy to trade with the trend.
Note that using multiple indicators doesn’t mean you’ll find a bunch of trends within a
day and get profits from all of them. On the contrary, an experienced trader only needs a
handful of trades to get good profits/month.
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