The use of indicators is very popular among rookie traders. Some of the intermediate traders often consider indicators as a waste of time. But if do some proper analysis, you will understand indicators are nothing but a blessing for the retail traders. If you can use it properly, you can easily find high-quality trades at any market. Making consistent profit in the Forex market is really easy. But the novice traders always find a way to make things complex. Though there are many techniques to trade the market, today we will give a clear guideline by which to trade the daily chart using parabolic SAR indicator.
What is parabolic SAR?
Parabolic SAR is an indicator which allows the traders to know about the potential reversal point of an asset. The indicators work based on simple dots. If the dots stay below the candlestick, the traders consider it a clear signal of the bullish trend. On the contrary, if you spot any dot above the candle it means the bears are taking control of this market.
Trade execution is fairly easy when it comes to the use of parabolic SAR indicators. Basically, you are trading the major reversal in the market. Let’s say, the EURUSD pair is in an uptrend. So, the indicator will always print dots below the candlestick. All of a sudden you spot a dot above the candlestick. The first dot acts as a warning sign of trend reversal. After the first dot, you need at least three consecutive dots above the candlestick to execute fresh short orders. Since you will be trading the market with indicator based trading system it’s imperative that you have access to the best Forex trading account UK. Without having a premium trading platform like SaxoTraderPro, you can’t find quality signals.
Using the support and resistance level
It’s true, you can easily make a profit based on the indicators reading. The pro traders use the support and resistance level to make things much better. Instead of looking at the indicators reading, they thrive to find the key support and resistance level in the daily chart. Once they have spotted the perfect support and resistance zone, they wait patiently to see any reversal sign in the daily chart. With the proper signals in the indicators, they execute the trade and make a decent profit by trading the major market reversal.
Using the fundamental factors
Since you will be trading the market against the trend, it’s imperative you have proper knowledge of the financial factors. Most of the time the major trend of the market tends to change prior to the high impact news release. Unless you find such news in the market, you should never execute the trade based on the parabolic SAR reading. Things might seem a little bit complex at the initial stage but if you use the demo account it won’t take much time to develop your trading skills. You might lose many trades at the initial stage but consider them as blessings. Learn from your mistakes and try to understand how this market works.
Never risk more than 1% of your account balance
Risk management is the most vital thing in any business. As a Forex trader, you should never execute any trade with high risk. The moment you will use the parabolic SAR indicators reading is the very moment you need to consider the risk factors. Never risk more than 1% of your account balance even though have an extreme level of confidence over your trading strategy. The outcome of any trade is completely random and no one knows which trade will hit the potential stop loss. So, always try to limit your risk exposure in every possible way. If necessary, take a professional trading course to learn about the advanced method of trade management in the trading business.