Using the Stochastic indicators in 4-hour time frame
19 julio, 2019 a las 3:58 pm #62386
Indicators are widely popular among retail traders. Many people often consider indicator based trading strategy is the best way to make money in the trading business. But in reality, indicators are nothing but a part of your trading strategy. You should never rely on the indicators reading and execute a trade with an extreme level of confidence. Use indicators as a trade confirmation tools and you will see decent progress in your trading career. Before we begin, you need to know about the three most common mistakes made while using any indicators. These are:
1. Using too many indicators
2. Using it in the lower time frame
3. Blindly relying on the indicators reading
The smart Singaporean traders never make the above mistake. You might be new to the trading profession but this doesn’t mean you will have to lose money like 90% of the retail traders. Learn about the key reasons for which the retail traders are losing money. Try to avoid those mistake and focus on quality trade setups. Take things seriously and try to educate yourself properly so that you can make a profit in the long run.
So, you know about the most common mistakes associated with the indicator based trading strategy. Let’s learn a simple technique to use stochastic indicators like a pro trader.
What is stochastic indicator?
Stochastic indicator is nothing but a leading indicator. It allows retail traders to understand to overbought and oversold conditions of currency pairs. Those who are new to this profession might think what you will do with the overbought and oversold readings of the indicators? There is nothing to worry! When you the stochastic indicator is an oversold condition you should for a potential buying opportunity. Many retail investors are trading CFDs with Saxo based on this simple prince. Similarly, look for a selling opportunity when it’s in an overbought condition.
Why do we need to use the 4-hour time frame?
Using the 4-hour time frame is not a hard and fast rule. It’s more like the parameters in which the indicators work best. If you use the daily time frame, chances are very high you will miss a big portion of the profit. Similarly, if you chose to trade the 1 hour time frame using the stochastic indicators, you might miss entering into the trade too early. In order to stay in the sidelines, it’s better to use the 4-hour time frame.
The smart retail traders don’t rely on the indicators reading only. They also use price action confirmation signal in the 4-hour time frame to execute the trade. We all know the stochastic indicator is a leading indicator. So, you must choose a suitable time frame which will give a precise price action signal. After doing extensive studies, the experts rely on the 4-hour time frame since it has a better win rate.
Focusing on the risk management policy
Trading the market with stochastic indicator is very profitable. This doesn’t mean you will take a huge risk to earn money. As a fulltime trader, you should always remember that trading is all about risk management policy. If you fail to trade the market with managed risk, you are most likely to blow your trading account. The smart retail traders always risk less than 2% of their account balance. No matter how well you trade this market, you are bound to lose money. So, if you start taking excessive risks, within a short period of time you will blow your trading account.
Use double stochastic with different period
If you want to trade the cross pair in the Forex market with stochastic indicators, you need to use double stochastic indicators with different period value. Make sure you test the different settings of the indicators in the demo account. Unless you can make consistent profit for two consecutive months, you should never trade the cross pair with double stochastic indicators.
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