Indicators are classic tools to analyze critical data in the market. Every professional trader relies on such tools to find reliable trade signals. After analyzing the price movement of the stock market, the professional traders take the data reading from the indicators to evaluate the overall quality of the trade signals. But they do this in a very systematic way and thus they are able to gain a real benefit. On the contrary, the rookies use too many tools and fail to take the data reading accurately. In fact, most of them don’t have the skills to analyze the indicators reading.
Becoming good at the use of indicators is not a tough task. If you follow some basic rules, you should be able to use the indicators just like a professional trader. Go through this article as we are going to discuss some amazing techniques by which you can learn the proper use of indicators.
Develop the basic skills
Before you start taking the data reading from the indicator, you have to develop your basic skills. If you evaluate the indicator reading before analyzing the price movement, you are violating the most basic rules for trading. You should have the skills to analyze the support and resistance level properly. As you learn to analyze the support and resistance level, you should be focusing on the daily time frame at the initial stage. By doing so, you can avoid false signals and spikes. Thus the overall learning process will become easier and help you to achieve the goals.
Use one or two indicators
At the initial stage, you should not start using too many tools. Use one or two indicators so that you can truly understand how these tools work. Make a list of the stocks to trade and study the price mechanism. After gaining the basic skills, you should be focusing on the indicator reading and try to relate the indicator reading with the price position. For instance, if the price hits a major support level, take the data reading from the indicator.
Similarly, you need to evaluate the indicator reading when the price hits major resistance. By doing so, you will slowly learn the behavior of the indicators. During this process, if you use too many tools, you will never understand the functions of a single indicator.
Use of moving average
Every successful stock trader has a strong idea about the use of the moving average. By using the moving average they find the direction of the trend. The position traders often use the moving average to determine the dynamic support and resistance level. Try using the 100-period moving average in the stock market.
You will be surprised to see that the price will react to this moving average most of the time. But do not get fooled and think it will provide you 100% accurate trade signals. You have to be careful with your trade execution process and be aware of the risk exposure level. Only then you can succeed as a full-time trader.
Without improving your discipline level, you can never learn the proper functions of the indicators. Indicators might be a trade filter tool but it solves many critical problems. Instead of trying to learn everything, you should create a simple routine. Remember, you also need to gain experience to extract accurate reading from such tools. This will be only possible when you spend adequate time in the demo environment.
Never think trading the demo account is a waste of time. Every successful trader has spent years learning the basics of the stock trading business. So, there is nothing wrong if you stick to the paper trading account for few months. Try to build your confidence level and once you are certain that you can use the indicators properly, you may start trading with real money.