A chart pattern trading strategy is one of the most effective ways to secure big profits. Those who are trading the Forex market for more than two years knows the importance of chart pattern trading strategy. Unlike the novice Aussie traders, the pro traders at Saxo always prefer to trade the daily time frame. They look for potential chart patterns in the bigger time frame since it allows them to make huge profits. Things might seem very hard at the initial stage but once you learn to the mechanism of chart pattern trading strategy, you can easily make a huge profit. Let’s learn the three most important rules of chart pattern trading strategy.
Trade with confirmation
The chart pattern trading technique is based on a breakout trading strategy. The breakout strategy is often considered to be a risky trading system since the market exhibit a false spike. Unless you get confirmation signal of the breakout of major chart pattern you should never trade the market. Things might be very easy at the initial stage but soon you will realize the importance of the confirmation signal. You can use an indicator or rely on the price action to trade the major chart pattern.
As a fulltime trader, you need to look for the potential breakout during the active trading session. If the price breaches a critical support or resistance level during the off-hours, this might be an indication of a false breakout. So, it’s highly imperative you learn about the different trading hours since it will help you to execute quality trades at the right time.
Focus on the major news
Do you know the key reason for the breakout in any currency pairs? Those who are new to the Forex trading profession often rely on technical data. Technical analysis is just a part of this trading profession. To make yourself comfortable in the currency trading business, you must learn to analyze the major news. Most of the time, a breakout occurs in the event of major news. Unless you keep yourself tuned with the latest market dynamics, it will be really hard to make consistent profit from this market. Things might seem very hard at the initial stage but once you learn to decipher the major news data, you can easily make a huge profit from chart pattern trading strategy.
Learning to analyze the major news is not too hard. Focus on the forecasted data and analyze the actual data. If necessary, read professional analysis on the economic website and you will get a clear overview of the market. Try to blend the technical and fundamental data since it will help you to make the right decision.
Trade with managed risk
If you trade with high risk, you might win some big trades but in the long run, you fail as a currency trader. Trading is all about managing the risk exposure and finding the best possible trades. To live your life based on chart pattern trading strategy, you must learn to manage the risk exposure. Never risk any amount which you can’t afford to lose. At the initial stage, start risking only 1% of your account balance. Once you become familiar with the chart pattern trading technique, increase the risk factors.
Making your life better based on trading is not that hard. Sadly, most of the traders fail to limit risk exposure. Though the chart pattern trading technique is very effective, you will still lose a few trades. Consider the losing trades as your business costs. Forget about the complex trading methods and try to find an easy trade setup. Focus on the risk-reward ratio, since it will help you to make a better decision in trades. Think twice before you execute any trade. Maintain a trading journal so that you can find the mistakes in your trading. Set realistic goals so that you don’t have trade the market under pressure.