Indicators can be a great tool for the traders if used properly. Every single indicator has its own unique function. Professional traders use indicators in order to find out the best possible trade in the market. It’s a tough choice to choose the right indicator for the right currency pair for the right option order. But relying too much on indicator can cause you heavy loss in the binary options trading.
Many traders believe that use of an indicator is totally unnecessary. No one can truly answer this question since it varies from person to person. But research and statistical data show using 1 or 2 indicators with valid trading strategy can significantly improve trading performance in binary option.
An example of improper use of indicators
In the above figure, the trader can barely see the raw price movement and candlestick formation. Using too many indicators will only cause your problems and creating doubt in your trading signal. Professional options traders use only 1 or 2 indicators for filtering the best trade.
The four indicators which has been used in the chart are powerful and reliable indicators used by many options traders. But the function of four different indicators will never conclude to single entry result. It will create much doubt regarding the next possible move of the pair. “In a word, the trader will get lost into the world on indicators.”Basically, the prime concept behind the use of indicator remains within its supplementary uses. But when you leave the raw price data and important support and resistance level then things become complicated. As professional traders, you must know how to use the indicator properly in your options trading platform. Surprisingly most traders make similar types of mistakes while using the indicator. So, let’s see, the most frequent mistakes that the options trader makes in their trading career.
Seven common Mistakes made by using indicators and oscillators
- Using too many indicators in the same chart for the confirmation of trade entry
- Believing the indicator blindly regardless of the price action scenario.
- Using the wrong indicator in the wrong currency pair
- Using indicator in the lower time frame and taking a decision based on single time frame chart analysis.
- Trading with the indicator without the proper knowledge of its functionality.
- Modifying the indicators present value with new set of data without any back test
- Ignoring the longer time frame scenario of the market and reacting to the shorter time frame indicator signal