Indicators are very helpful tools for retail traders. Sadly, new traders don’t really know the proper way to use an indicator. They simply use too many indicators in their trading charts and make things overly complex. On the contrary, the experienced traders in Hong Kong follow some simple logic to find the best trades. In fact, they never use more than 2 indicators to find the very best trade setups. Though there are many kinds of indicators, the experienced traders prefer to trade the market with the RSI indicator. RSI refers to relative strength index and it helps the traders to find the overbought and oversold condition of a certain asset. Today, we are going to learn how to use this indicator like a pro trader.
Use one indicator only
Being a rookie trader, it’s normal to use more than one indicator. But using too many indicators in your trading chart will create massive confusion. In fact, just by learning the use of RSI indicator, you can easily spot high-quality trade setups. Those who are completely new to the trading profession might think understanding RSI reading is really hard. In reality, this is one of the easiest tasks in the Forex market. If the RSI reading stays near the 30 marks, looking for buying opportunity. Similarly, when the reading is at 70, you need to look for a selling opportunity. Though you can use this indicator in the lower time frame, at the initial stage you should stick to the higher time frame.
Use of Japanese candlestick pattern
The pro traders use the Japanese candlestick pattern to execute high-quality trades at the key support and resistance level. Even after using the price action confirmation signal, they often lose money. But the smart traders use the RSI reading to filter out the false signals. Being a new trader, you should visit https://www.home.saxo/en-hk to learn more about professional trading platform. By using a robust trading platform you can easily filter out the precise price feed and execute a trade at the key levels. Some people often trade the cross pair using the RSI indicator. But this is absolutely wrong. You need to stick to the major pair trading strategy or else you might lose more trades in the market.
Modifying the value of the RSI indicator
Modifying the value of the RSI indicator can greatly improve your win rate. However, finding an optimum value for the indicator setting is really hard. You need to use the demo account to test different settings of the indicators. In the demo trading environment, you might have to lose many trades but this is very normal. But make sure you learn from your trading mistakes since it will help you to find the optimum value for the RSI settings.
Managing your trades
Trade management skills are the most crucial things in the trading business. You can’t become a successful trader unless you learn to embrace the losing trades. Embracing the losing trades is a very challenging task since human beings are not programmed to accept the loss. So, you have to train your mind and accept the fact, losing is nothing but a part of this profession. But this doesn’t mean you will lose a big portion of your investment in one trade. Even though RSI based trading strategy has a high win rate, you need to limit your risk exposure in every possible way. Never risk more than 2% of your account balance in any single trade.
Making consistent profit using the RSI indicator is not that hard. But you must understand the importance of having a risk management policy. Most importantly, you must use the RSI reading in the higher time frame. Once you find a trade, make sure you are not risking any amount that can’t afford to lose.