Why should a trader not always rely on trading indicators

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Why you should never rely on Forex indicators

Indicators can be very powerful trade filter tools. It can give you accurate signals and allows you to find the best trades. But things start to change when the traders start developing the trading strategy based on indicators. If you try to trade major markets based on the indicators reading, you are going to have a tough time. You can live your life in Singapore based on many professions. There is no reason to start using the indicators and look for quick profit-taking the opportunity in the Forex market. Let’s find out the key reason for which you should never rely on Forex indicators.

Table of Contents

Leading and lagging signals

The indicators give leading and lagging signals. For instance, if you rely on the RSI, you are going to get early signals. Executing the orders on the RSI reading is going to result in a big loss. Similarly, if you try to trade the market with SMA or simple moving average, you are just dealing with lagging indicators. You will get the signals after the market has given its big move. So, try to learn more about the leading and lagging indicators to make consistent profit from this market. After you learn these things, you will feel the change in you.

Indicators are not perfect

You should never think the indicators are the perfect tools. Noting is perfect in this world. The elite traders are losing money by following a premium strategy. To survive in the Forex trading industry, you must think about causality. Losing trades will be very common and there is nothing you can do to avoid losing orders. If you start to think the indicators are the perfect tools, you are going to lose most of the trades. To become a better trader, you must learn to trade the raw price data. Stop relying on the indicators reading as it increases the risk factors to a great extent.

Limits your learning potential

The moment you start relying on the indicators, you stop learning new things. Without learning new things about this market, it’s very hard to keep pace with the trend price movement. The majority of the retail traders are losing money since they stop learning after getting used to the indicators. Indicators are nothing but a tool that helps you to filter the market noise. If you make consider your prime trading tools, there is no way you can make a profit from this market.

Execution of precise trade

You must learn to execute precise trade to earn more money. Those who rely on indicator based trading strategy are losing most of the trades since they don’t know the perfect way to execute the trade with precision. If you want to make profit from this market , make sure you work hard to improve your trading accuracy. Try to learn about the price action trading strategy since it allows you to trade the real-time market dynamics. Most importantly you will become a confident trader after learning to use the price action signals. On the contrary, those who use the indicators always use wide stop loss and they never know why they are losing money.

Trade with low risk

By using the indicators you can’t reduce the risk. To reduce the risk, you must learn to trade the major level of the market. Focus on the trend line, Fibonacci and other important tools. Draw the key levels in the higher period so that you can execute the orders with precision. Things might hard and you might have the idea to lower the risk via manual trading strategy. But with the help of the demo account, you can expect to develop your skills. Forget about the EAs, robots, and indicators in the Forex market. Try to learn about the manual trading strategy as it makes you a better trader. Most importantly you will become confident with your trading approach.

Why You Should Ignore Fundamentals When Day Trading

Whether you day trade forex, stocks or futures, don’t get distracted by fundamental analysis. While fundamentals are relevant to long-term investors, day traders will likely find that fundamental analysis does not improve their performance on short-term trades. Most successful day trades don’t concern themselves with fundamentals. Here’s why.

Fundamental Analysis Is Irrelevant on Short Time Frames

For a trade that last five minutes, what is on a company’s balance sheet isn’t going to matter much. A company can have horrible financial statements, and yet for months on end, it can rally. A company can be strong financially, with great earnings, and yet some days the share price will drop like a rock. The point is, fundamentals don’t matter on short-term trades.

Anything can happen within the very short time duration of a day trade because the price is always moving, both up and down. As day traders we don’t need to know anything about the financials of the company we are trading. Such data will only serve to distract us. If you do know about the financial position of a company, don’t let it bias your trades. As indicated, anything can happen during one day, and especially during one trade.

Day Trading Profits Don’t Rely on Fundamental Analysis

As a day trader, the primary goal is to consistently implement a trading plan. Researching how bad or good a company is doing only blinds us to what is happening on the only real piece of timely information that matters–the price chart of that company (or forex pair or futures contract).

The price chart tells us exactly what an asset is doing at any given time. By analyzing the price chart we can find trade setups based on our trading plan. If a trading plan or strategy has been proven profitable, then there is no need for fundamentals. Day traders are better off trading and formulating strategies based on repeating price (chart) patterns that occur every day and leaving the fundamental trades to long-term investors (who aren’t worried about minor intraday price fluctuations).

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Fundamentals Are Not Timely Like Charts

As indicated above, your charts tell you exactly what is happening now. That’s what matters to a day trader. We don’t need to worry about where a stock price will be 10 years from now (like an investor does), we only need to worry about right now. Various economic indicators are released every few days, and company financials are released each quarter. The infrequent occurrence of these data points makes them of little consistent use to a day trader.

Instead of reading financial statements and economic reports, day traders practice their chart reading skills, finding trade setups and implementing their trading plan.

Short-Term Reactions to Fundamental Data Are Not Always Predictable

It would seem reasonable that if analysts are expecting a company to generate $1/share in earnings, and instead the company produces $1.05/share, that the stock would go up. Yet this isn’t always the case. How the market will react to a fundamental data point (whether economic or company/commodity-specific) can be seemingly random. Sometimes a good result can send an asset plummeting lower (if people were expecting an even better result) or a bad result can send an asset higher (if the bulk of traders thought it would be worse). Many day traders get seduced into thinking they can predict how an asset will move based on what they think the fundamentals will reveal and/or how the market will react to it. Many day traders have gone broke attempting this. If we can’t predict the outcome of the news with a good probability (and good risk/reward ratio) then it best to just leave fundamentals out of our day trading.

The One Time to Monitor Fundamental Data

As a day trader, there is no need to follow the news or be aware of the underlying financials of a company or the economy. We do need to know when earnings or economic reports are released though. While the actual numbers related to these releases don’t matter to most day traders, these news events can cause big swings in price as both short and long-term traders to react to the news.

If day trading U.S. markets, the Bloomberg economic calendar provides a schedule of news releases and important events that could affect the market. Stop day trading about 5 minutes before, and for about 3 minutes after (sometimes longer if the price is moving wildly), the news release. Focus on capturing normal movements that occur every day; don’t get greedy and try to predict how the market will react to a high impact news release. Often the price will move aggressively in both directions, stopping you out before the market establishes a more sustained trend.

The same concept applies to forex trading. Step aside for high impact news releases. Since the forex market is global, be aware of all high impact news events that may impact the currency pairs you are trading.

If day trading stocks, be aware of scheduled company announcements in the stocks you are trading, such as earnings announcements. Stock traders should also be aware of major economic data releases, and step aside during those times as well.

Final Word on Day Trading and Fundamentals

Fundamental analysis is a tool primarily used by long-term investors. It is not a timely resource for day traders since there is a long lapse between when these data points are released. Also, on any given day or minute a stock can rise or fall despite what the fundamental data indicates. While fundamental data releases can cause big price moves, the direction and magnitude of those moves are hard to predict with any certainty. Therefore, day traders are better off stepping aside during news releases and not attempting to perform fundamental analysis. Instead, stick to trading ​the price patterns that occur frequently throughout the day in a particular market.

Why Traders Should Use MetaTrader 4

More and more trading platforms can now be found online, thanks to the continuous advancement of technology.

But one trading platform has stood out above the rest by proving itself to be highly effective; the platform widely known as MetaTrader 4.

Despite having mixed reviews, numerous brokerages offer their clients MT4 as the trading platform in their respective websites due to many of its perks.

This is now your chance to learn more about one of the most popular and most operated trading platforms which is known as MT4.

What is MetaTrader 4?

MetaTrader 4 or, as traders call it, MT4, is a state of the art trading platform used and popularized by many traders and brokerages alike across the globe.

MT4 is a software developed by MetaQuotes Software which can be used by both traders and investors to open, close, and manage market positions through the use of a financial mediator.

MetaQuotes built the platform and gave it the purpose of trading in foreign exchange (forex), futures markets, and contracts for differences (CFDs).

You can use MetaTrader 4 to perform advanced trading operations while also analyzing the financial markets.

Trading platforms are normally offered by online brokerage firms for free or at a discounted price with the condition of maintaining a well-funded account.

But MetaTrader 4 can be downloaded from HQBroker’s main website wholly for free and with no conditions attached. You can also download the platform directly from the MetaQuotes website.

What Sets MetaTrader 4 Apart?

MetaTrader 4 supports three trade execution modes, as well as two market, four pending, and two stop orders, plus a trailing stop function. There are also quick trading functions which allow sending trading orders directly from the chart with just one click.

Aside from these, the built-in tick chart feature will give you a way to accurately determine your perfect entry and exit points.

Trade Execution Modes

You can choose from the three trade execution modes that MetaTrader 4 offer:

  1. Instant Execution
  2. Execution on Request
  3. Execution by Market

The Instant Execution mode executes the order at the price offered to the broker. The terminal will set the current prices in sequence upon sending the trade order, but it will not be executing any order until the broker accepts the prices.

A “requote” might occur when the broker returns the prices. After that, the order can be executed.

Second is the Execution on Request . In this mode, the market order can be executed at the price that the broker provided beforehand. Prices are initially requested from brokers before the order is sent when it comes to inputting certain market orders. When the prices are available and delivered, the order execution at the given price can then either be confirmed or rejected.

Execution by Market is the last of the three modes you can choose from. When using this mode, you relinquish authority to the broker, since it will give the broker the power to make decisions about the order execution price without needing any additional discussion with you, the trader. This means that you give advanced permission to the order execution at this given price.

Order Types

MetaTrader 4 also allows you to place different order requests , which are Market order, Pending order, Stop Loss and Take Profit.

Market orders are made as a way to guarantee your brokerage company that you allow the buying or selling of a given security at the current price. Upon execution of such order, a trade position will instantly begin to move, tracking the various changes taking place in the actual financial markets. You can also add Stop Loss and Take Profit orders alongside the market order; the mode of execution is dependent on the security you chose to trade.

A Pending order is the commitment you make to the brokerage company, giving them the permission to buy or sell a security in the future but at a predetermined price. This order can be used when opening a trade position provided that the future quotes will reach the predetermined level. A Stop Loss and Take Profit order can be automatically attached to pending orders when a pending order has been activated.

There are four types of pending orders that MetaTrader 4 offers:

  • Buy Limit – This type of order are usually made when expecting a security price, which has recently fallen to a certain level, to increase in the future. A buy order can be executed provided that the current “ASK” price level is higher than the value of the placed order.
  • Buy Stop – When you predict that a security price, which has risen to certain level, will only keep on rising, you can place this type of order. A buy order can be executed provided that the current “ASK” price level is lower than the value of the placed order.
  • Sell Limit – Orders made under this type are normally made when you expect for a recent uptick in the security price to make a turn around. A sell order can be executed provided that the current “BID” price level is lower than the value of the placed order.
  • Sell Stop – When making this type of order, traders usually expect that a security price that has recently dropped will continue falling. A sell order can be executed provided that the current “BID” price level is higher than the value of the placed order.

Stop Loss and Take Profit orders normally go together, but we’ll now be discussing them separately.

A Stop Loss order can help in minimizing the losses you incur if the security price begins moving towards an unprofitable direction. If a security price reaches your set price level, the position will automatically closed. They are always placed together with a market or a pending order.

A Take Profit order, on the other hand, is intended for gaining profits. When a set level for profits has been reached, the position will automatically close. It is always connected to an open position or a pending order, and can only be placed together with a market or a pending order.

Benefits of Using MetaTrader 4

Aside from the MT4, there are other platforms out there that you might have heard of as well through some reviews or people you know, such as ZuluTrade, NinjaTrade, and Trading Station. But not all leading trading experts offer those other platforms, unlike with MetaTrader 4.

So, what is it exactly that makes brokers and traders choose MetaTrader 4 over and over again?

There have been countless reviews and posts made by traders which detail their thoughts about the infamous trading platform.

You can try researching on the internet; trader reviews about MetaTrader 4 will begin pouring out, telling you about their own experiences and thoughts regarding the trading platform.

Almost every notable broker offer MT4 as their trading platform, giving it a vast community of traders and brokers, each of which have different experiences when it comes to dealing with the platform.

The MetaTrader 4 was designed to have a professional look and feel, along with the extensive range of professional features which is the standard for every trading platform. It also comes with a wide range of customizable indicators that can be easily added and removed from the charts.

Other trading platforms are browser-based, unlike MetaTrader 4 which can be downloaded and used, separate from your browser. It is also much easier to use and manage aside from having generally fewer glitches than most platforms out there in the financial industry.

Additionally, MetaTrader 5, a newer trading platform also made by MetaQuotes Software, does not provide any options for hedging, which has led to disappointments seen in the MetaTrader community reviews. This only led to a greater boost in the popularity of the previous version.

Hedging is practically providing protection to your funds or assets. It works much like how insurance does. When you have important belongings, you would like to protect them as much as you can, thus making you consider buying other investments to ensure yourself from any possible harm in the future.

Hedging will allow you to protect yourself from any negative event that might come your way, but keep in mind that hedging does not and will not completely eliminate the impact of a negative event. It just lessens the blow so that you won’t experience more loss.

Now back to the MetaTrader platforms. MT5 does not support hedging and multi-hedging, something that most traders look for when deciding on what platform they should operate with.

There have been suggestions for workarounds, but most would prefer to not rely on any plugins when dealing with their platforms, something you won’t have a problem with when using MetaTrader 4.

This is one of the main reasons why HQBroker uses the MetaTrader 4 platform; the brokerage firm allows its clients to hedge their portfolios to make their accounts safer. The positive or negative reviews of others won’t matter as long as you know how to properly utilize the platform to your advantage.

MetaTrader 4 also has a significantly lower demand for RAM usage. It doesn’t need to take up too much space in order to function at its best, unlike with MetaTrader 5 which demands the use of 3 times more RAM memory. It can function well on computers or iOS and Android devices.

Drawbacks of Using MetaTrader 4

In spite of the benefits that you can reap from using MetaTrader 4 as your trading platform, there are still some drawbacks that you must first consider to avoid any possible regrets over deciding to use the MetaTrader 4 platform:

  • MetaTrader 4 offers limited flexibility when compared to the other platforms that you can find in the financial industry today. So it’s important to remember that once you put up guidelines, the platform will strictly adhere to implementing them, which can also lead to another drawback.
  • The set of rules and guidelines you implement in this program might cause you to not be able to realize the big gains even when they’re right in front of you.
  • Sudden changes in the foreign exchange market do not immediately show in the MetaTrader 4 program. For example, if a press release was made regarding the economic status and the market reacts to it, MT4 might not immediately react to this change.
  • Not every operating system out there can run the MetaTrader 4 platform. It is strictly limited to major operating systems Microsoft, iOS and Android . So, if you don’t have any device that runs on this operating system, it won’t be possible for you to use it.

Final Thoughts

The number of trading platforms that are available out there in the financial industry will only continue to grow, and you can’t just keep on trying every new one that comes along.

You can rely on other people’s opinion about each and every trading platform; just don’t let it cloud your own judgment.

You can try out other platforms to know which one will be the best for you, and rest assured that you will always have MetaTrader 4 to fall back on.

MetaTrader 4 has been used and relied upon by numerous traders for years since it was initially released to masses. Even though some reviews point out its imperfections, it doesn’t mean that it is useless and should be disregarded once a new and updated version comes along.

MT4 offers every trader unlimited access to trades which can be managed easily without needing to exert too much effort. It has its own benefits and drawbacks, so consider wisely before making any final decisions.

MetaTrader 4 can help make your trading journey much easier; assisting you on every transaction along with your own broker.

Don’t let another minute go to waste, learn as much as you can through research and remember that important lessons can also be learned through experience.

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