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In this part of guide, we will look into different trading tools and strategies. Of course this is still more like overview because topic itself is very wide. I want you to see that there is a choice to make.
Which trading tool is best for you?
There are many tools like oscillators, averages and others. Common mistake among new traders is to mix everything up. They feel more comfortable when there are more tools on chart. This way it is hard to learn with one specific tool. Because you have so many tools on chart you will act on different signals.
Yes, some indicators work great together but you should know what are you looking for. This may be very confusing. Result is always the same – no progress.
Try to start with few averages and one oscillator (if you plan to use that tools). Trade with that setup for some time – at least for few weeks. Try to optimize parameters.
One more thing, read about your trading tools. What is formula behind them, how they work. Sometimes you can see screen with 2 or 3 oscillators which are basically very similar to each other. There is no point in that. Try to understand how your indicator works.
Which strategy is right for you?
There are many approaches here. Some traders prefer to follow trend on longer time frames. Others like to open positions more often – they are swing trading. Add to that possibility to trade fundamental, to write your own trading robot or trade naked.
That is a good thing. But what about best strategy for new traders? I would say that it should be a strategy that allows you to trade on higher time frames and profit on longer moves. It doesn’t have to be trend following strategy, it can be also swing trading strategy.
I wrote about it before, but I mention it again. Most new traders think that they must trade on lower time frames to make money. For them these low time frames are like deep dangerous water for new diver. This is a place where sometimes more than half of trades is done by robots. We have also High Frequency Trading. And biggest of all – risk to overtrade.
On higher time frame there is more time to analyze current situation, to check other time frames. When you catch a good move, you can make sometimes very large profit. To make money on lower time frame you must invest with high leverage. And for new traders high leverage is a killer.
What settings are best for my stochastic/macd/rsi/other on eurusd/gbpjpy/other?
Please, don’t ask that question. There are so many different setups. Each currency has its own characteristic. Each timeframe is different.
Just use price history. With that you can select the best settings for your tools.
Most common mistake – invisible price action
The most important thing to remember is that all is based on price. If you add to many indicators, averages and other tools then you may miss important price action. That is why it is good to trade on naked chart – at least from time to time. Thanks to that you will be more aware of price movements.