Indicators are blessings for novice traders. If you want to become good at trading, you must learn the proper use of the indicators. Most of the rookie traders mess things up as they don’t know the proper way to find good trade signals. They mess things up and loses a significant portion of their trading capital. On the contrary, professional traders use the indicators in a very strategic way and find the best possible trade signals in the market.
In this article, we are going to discuss the most frequently used indicators in the CFD trading profession. If you read this article, we can assure you that you will be able to find the best possible trade setups.
The RSI or the relative strength index indicator is usually used to find the overbought and oversold state of an asset. The rookie traders often get confused by seeing the critical market dynamics and blames the market. But if they use the RSI indicator, they can easily find the key reversal points. In fact, finding reliable trade signals will become much easier. While using the RSI indicator, try to rely on the higher time frame data. If you rely on higher time frame data, chances are very high that you will find the best possible trade setups.
The stochastic indicator is mostly used to find the key reversal point in the market. The function of this indicator is closely related to the function of the RSI indicator. Read this article and learn more about the overbought and oversold state of an asset. As you learn about this factor, you should be able to scale your trades in a strategic way, and thus securing profit will become much easier. For instance, if the reading in the stochastic indicator falls below the 20 levels, you should be looking for a buying opportunity. On the contrary, if the reading goes above the 80 levels, you should be looking for the selling opportunity.
The moving average indicator is a very popular indicator used by professional traders. The professional traders use the moving average to find the direction of the trend. As a new trader, you might be thinking that finding the perfect direction of the trend with the help of the moving average is a very tough task. But if you do the proper research, you will realize that it is nothing but an easy task. For instance, you may set the period to 100 and expect to find the direction of the trend in any time frame. However, if you rely on the lower time frame, we strongly recommend that you focus on the moving average with period 200.
Bollinger band indicator
The Bollinger band indicator is mostly used to find the upper and lower range in the asset. If you want to find some good trades, we strongly recommend that you learn to use the Bollinger band indicator in a very strategic way. Never expect that you will become a successful trader within a short time. Learn to use the Bollinger band indicator in the demo trading account and try to build your skills. Once you become good at using the Bollinger band indicator, you should be able to make the right decision in the most critical state of the market.
Use of custom indicator
Some of the traders often use custom-made indicators in the market. If you rely on such indicators, we strongly recommend that you learn to deal with them in a paper trading account. Once you become comfortable in using the custom-made indicator, you will feel the change in your trading performance. But remember, not all custom-made indicators are good. Some of them are actually horrible. So, chose your indicators very carefully, or else you will be losing money most of the time.