Reversal trading is one of the most complicated tasks in the trading business. Naïve traders in the UK are always advised to trade along with the trend since it limits the risk to a great extent. Trading tops and bottoms is always very tempting but it is a very hard task. Without having extensive skills in spotting the potential reversal zone, you should not attempt to trade the key reversal. After knowing the factors, some traders often feel they can trade the reversal. Those who have a strong foundation and know about the most common mistakes associated with reversal trading strategy manage to make a profit. On the other hand, those who don’t have the necessary skills blow up their accounts.
This is article is going to enlighten your vision regarding the trading profession. After reading this article, you will never have the panic to trade the key reversal. Read the rest of this article very carefully and make sure you about these mistakes while trading the reversal.
Choosing the lower period
Do you want to trade the reversal? If so, start working hard on your patience level. Those who don’t have the patience often switches to the lower time frame (1 hour or 30 minutes). But choosing such a time frame exposes yourself to a great risk. You can’t identify the endpoint of the trend. You should change your analytical time frame to boost your profit factor. For instance, you should not be choosing any time frame lower than the daily one. By doing so, you are looking for the key support and supply zone. So, how to develop the patience level? To do so, you have to practice trading the demo account for a few months. This can boost your amount of patience to a great extent.
Trading the minor news
You should learn about the professional trading community before you start trying to trade the reversal. Join here and see how the elite Saxo traders deal with the reversal. Unlike the rookies, they never trade the reversal based on minor news. Reversal is the result of high impact news like NFP, interest rate change, etc. so, if you see a significant change in the price during the medium to low impact news, you should not consider it as the reverse. It’s more like the false spikes in the market. No matter how good your technical analysis is, you should not try to trade them based on minor news. Find the schedule of major news and look for the reversal patterns.
Adding position to the losing trades
At times, reversal trading becomes very risky since the new traders keep on adding a position to their trades. This might turn into a very big profit but if things go wrong the traders are going to lose a big portion of the capital. You should always think about safety while trading the key reversal. Though it is a very complicated task you can learn it by using the demo account. Once you get good at managing your trades, you can boost your confidence level to a great extent. But make sure you are not biased based on the opinions of expert or naïve traders. Be confident with your technical analysis. This doesn’t mean you should never pay attention to a pro trader’s advice. Listen to their statements and try to find relevant information that can help you with the trade.
Reversal trading is not as hard as it seems. If you can stick to the rules in this article, you can expect to make big profits forms this market. To execute trades in the trend change, you must use a professional platform. So, start doing some research on the internet and find a reliable broker like Saxo so that you don’t have to deal with a faulty environment.