How to Make Consistent Profit From Indicators
In today forex faq, we have a question from one of our fellow traders asking me the below question
I have seen many indicators but, prefer using bollinger band,macd,and mometum indicators. Can you please give me details on the best way to make consistent profit with these indicators? Thanks
The bollinger bands serve as a very good support and resistance indicators and you can make use of the lower and upper band in your trading.
The MACD is a very good indicator to tell the reversal of trend by using the MACD divergence technique
Momentum indicators are typically good in helping your with catching the trend and momentum of the market.
However there is one thing I will like to share with you here.
In order to make consistent profits in trading, indicator is only part of the plan. Most new traders think that by selecting a set of useful indicators, they will be able to make consistent profits in trading and that is not true.
In order for you guys to be able to make consistent profits in trading, you will need to have a reliable strategy that have the following features.
1) Pre Trade Setup – This is an important feature that a strategy must have so that the trader need not stick to the computer the whole day.
The purpose of becoming a trader is to have all the freedom to do what we want, if you have to stick to your computer the whole day, then it will be the same as doing a day job.
Therefore a strategy must always have a pre trade setup to alert the traders of an incoming trading opportunity.
Some readers ask me whether I stick to my computer the whole day to look for trading opportunity. The answer is NO, I look at my computer chart every hour and I just need to scan the chart for 5 minutes and that is it.
If I find a valid pre trade setup, I will then be more alert and then wait for the entry signal.
If I do not see any pre trade setup, then I will be back an hour later or so
2) False Alarm Filter – This is another very important factor that all strategy must have.
Even when all the setup is according to plan, you will still find that the trade could end up as a losing trade. This is mainly because of the false alarm signal produce by the indicators.
Therefore it is very important for a strategy to have a false alarm filter technique to help the trader avoid getting into a losing false alarm trade.
It is impossible to avoid getting into a losing trade as we have to accept as a trader that losing is part of trading.
What the false alarm filter system does is to reduce the number of losing trades and therefore increase our profits.
3) Precise Entry and Exit – Lastly, a strategy must definitely have a precise entry and exit techniques so that a trader do not need to rely on guesswork to enter a trade.
With a precise entry, you will never miss a trade nor enter a trade too early or late.
A strategy is not just about the indicators, it must have the ability to alert you of an incoming trades, identify false alarm trading opportunity as well as accurate entry and exit signals with zero guesswork.
As long as you have all these above in place, then you will be able to make consistent profits in trading for a long long time.
Do let me know if you have any question