Indicators are some of the best tools to use to find the false trade setups. Many pro traders in Singapore prefer to check their indicators reading before they execute any trade. But learn the proper use of indicator is a very challenging task. In fact, most of the rookie traders end up by using tons of indicators with a hope to find the best trades. But the moment you start making things complex is the moment you start losing money in trading. You need to understand the simple trading systems are the best way to make a consistent profit.
Though there are many kinds of indicators you can use, today we are going to highlight the use of Bollinger band indicator. After reading this article, you will be able to execute quality trades using the Bollinger band and price action confirmation signals.
Understanding the Bollinger band
The Bollinger band is an indicator which helps the retail traders to find the key support and resistance level. The support and resistance level are based on the principle of a simple moving average. The lower band of the indicator act as a critical support level and the upper band act as a dynamic resistance level. The pro traders execute long orders the support level and look for selling opportunity near the critical resistance level. Though the Bollinger band trading strategy is fairly easy, the pro traders prefer to use the price action confirmation signal.
Using the price action confirmation signal
Being a new trader in the exchange traded funds industry, you need to learn more about price action trading strategy. Just by using the price action confirmation signal you can easily execute long and short trades. But some of the rookie traders often use the price action confirmation signal to trade the lower time frame. A lower time frame trading strategy is often considered as the riskiest business in the world. Most of the time you will end up with low-quality trade setups. To avoid such problems, the pro traders always use the daily or weekly time frame to trade the major bands of the indicators using the price action confirmation signal.
Setting up the stop loss and take profit
Setting up the stop loss and take profit is very easy when it comes to the Bollinger band trading strategy. The pro traders prefer to use the simple price action candlestick pattern to determine a perfect stop for their trade. On the other hand, the rookie traders often use the band to set the stop loss. When it comes to the take profit level, make sure the trade has at least 1:3 risk reward ratio. Being a new trader you might trade the market with a 1:1 risk reward ratio but this is not the solution to your problem. You need to understand the fact that trading is all about managing your risk exposure in the most efficient way. So, try to find a high-risk reward trade setup as it will increase your win rate.
Managing your risk factors
Mastering the Bollinger band trading strategy is very easy. Though the system is extremely profitable the pro traders never risk more than 2% of their account balance. You need to understand the fact, trading is all about managing the risk factors. Regardless of the quality of the trade setups, you are bound to lose trades on a regular basis. Try to master your trade management skills since it will help you to ride the long term market trend with an extreme level of precision. Forget about short term gains because it never works. Try to consider trading as your business and only then you will be able to change your life. Keep learning new things about the market to keep pace with the dynamic changes in this market.