You need to use data that can help you calculate the odds and that means using enough data to allow you to do this.
This is common sense, yet a huge number of novice traders still try day trading – it doesn’t work PERIOD.
All volatility is too random in short time frames and support and resistance levels are meaningless. You can’t get the odds in your favor and you can’t win.
Predicting Without Confirmation
Perhaps the most common mistake of all – novice traders simply love predicting but this is really relying on hope or guessing and in any money making venture, if you rely on hope you will lose.
For example, instead of buying a dip to support and hoping it holds, you need to see prices turn up and CONFIRM support has held before executing your trading signal.
If you have never used momentum indicators before, then you need to learn about them and use them and two of the best are the stochastic and Relative Strength Index - if you dont know them learn how to use them.
Not Buying Breakouts
Most traders are obsessed with “buying low and selling high".
If they see prices breakout above a new high, they want to wait for a pullback to get on board.
Generally when prices break to the upside above strong previous resistance, they don’t pull back.
You need to learn to buy breakouts if you want to catch the best trends due to this fact:
Most major trends start from new market highs - NOT market lows.
So if you don’t buy breakouts you are missing out on the best potential trading opportunities. “Buy high sell higher" is the key so remember it.
Not Being Objective
If you are too subjective your opinions get involved and so do your emotions so try and stay objective.
Avoid indicators that involve too much subjectivity, such as Elliot wave, cycles or any other indicator that is not objective.
Using Indicators Incorrectly
A good example would be the huge amount of traders who buy dips to moving averages – It’s a lagging indicator! Or buy and sell the outer Bollinger bands – it’s a volatility indicator! Neither should be used to enter trades on their own.
The above are common misuses and there are many more.
Using To Many Indicators and Curve Fitting
If you use too many indicators n your Forex charts to generate trading signals you will lose.
In forex technical analysis simple systems work best, as there are fewer elements to break in the brutal ever changing market.
Less is more when using indicators and devising your forex trading system.
The above are all common errors when using forex charts and if you make any of them you will lose so make sure you avoid them.
