Developing a perfect trading strategy using the stochastic indicator

[leocyril12]

The use indicators can be a very challenging task for novice traders. In fact, most of the retail traders don’t know the proper way to use the indicators in real life trading. They simply overload their charts with different kinds of indicators with a hope to create a perfect trading strategy. At the end of the day, they all lose money by using a complicated trading strategy. You need to understand the power of a simple approach in the trading business. Unless you learn to play safe in an easy manner, you are not going to become a successful trader.

Today, we are going to give you a clear guideline to create a perfect trading strategy using the stochastic indicators. To help you understand it better, we have to break down the details in three easy steps.

Step 1, use a demo account

Being a rookie trader, you should never trade the market with real money. You might be very rich but there is no reason to risk your real money when you can learn trading in a demo account. Even the pro traders suggest using the Juno Markets demo account to learn more about this market. First of all, try to familiarize yourself with the dynamics of the Forex market. Devote yourself so that you can understand how this market works. Stop thinking about the losers of this market. Think about the successful traders and set a goal to make a profit from this market. Unless you have strong determination, devotion, and dedication, you will not be able to survive in the trading business.

Step 2, trading the real market

Once you have developed strong confidence in your demo trading performance, it’s time to open a real account. Think about the ib Forex program since it will give you a decent chance to create a steady alternative source of income. Once you have access to a premium trading account, it’s time for you to trade the market with real money. Try to execute a trade at the key support and resistance level since it will help you to make a better decision at the complex market condition. Stop trading the market in the lower time frame as it always generates low-quality signals.

The novice traders always jump into the trade after they find the perfect setup. However, this is not the proper way of trading. In order to increase your win rate, you need to use the stochastic indicators reading. It helps the traders to find the overbought and oversold condition of the currency pairs. If the reading of the stochastic indicator stays near the 80 mark, consider it as an oversold signal. Similarly, if it stays near the 20 mark, you need to understand the market is oversold. During an oversold market, you need to find bullish price action signals. Just using this simple technique you can easily create a powerful trading strategy which can help you to find the very best trade setups.

Step 3, managing your risk exposure

Creating a balanced trading strategy using the stochastic indicator is really easy. But that doesn’t mean you will always win the trade. You need to consider the random outcome of this market. At times, you might have to lose a few trades in a row. Does this mean you have a bad trading strategy? The straightforward answer is no. No matter which trading strategy you follow, you must have to deal with the losing orders. The pro traders simply minimize their risk factors in each trade since they know the outcome of any trade is unpredictable. As a fulltime trader, you must not risk more than 2-3% of your account balance. Learn more about trade management skills so that you can easily ride the market trend by using simple trailing stop loss features. Focus on the fundamental factors as it greatly helps you to assess the strength of the market trend.

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