Many traders like to use pivot points and moving averages but make fatal mistakes and don’t use them correctly, which ensures the indicators which can help their profitability actually causes them losses.
If you are using these indicators or thinking of using them, then learn now to use them correctly.
Here are some tips that will help you use these indicators correctly.
1. Don’t use them on meaningless data
More traders than ever are day trading and their losing.
The reason why is simple the time frame is to short and all volatility in daily periods is random and therefore NO technical indicator will give you any advantage, pivot points, moving averages, or any other indicator can help you make profits.
Ever seen a day trading vendor who has real time track record of profits?
You won’t!
Because it doesn’t work, volatility can and does, go anywhere in a day and traders lose – it’s as simple as that.
2. You can’t time entries with them!
Moving averages define the longer term trend; pivot points indicate points of rotation by definition, so they are telling you where prices may find support or resistance - nothing more.
Many traders like to simply wait for prices to reach the levels and enter their trades and then hope prices turn in the direction they anticipating, but if you rely on “hope” you will lose.
Never trade on “hope” trade with the odds in your favour.
This means when prices move towards the price levels you are looking at, you need to get the odds in your favour and that means combining them with momentum indicators to time your trading signals with the risk to reward I your favour.
You need evidence that price momentum is indicating the levels will hold.
If for example, prices move to support and price momentum turns up, you have the odds in your favour that support will hold and you can execute your trading signals.
Good momentum indicators are ones such as, the stochastic and Relative Strength Index (RSI) and if used with pivot points or moving averages, you have a powerful combination.
It’s all about combining indicators for profit – no indicator works on its own, so you need indicators that complement each other.
THE Biggest Mistake any Trader Can Make.
Is to try and “predict” market direction. Most day traders do this as standard and most people who use pivot points and moving averages, who try and execute trading signals with them are doing the same.
You can’t predict turning points so don’t try – act on confirmation and you will increase your odds of success dramatically.
Keep in mind trading is an odds game not a game of guessing, hoping or predicting – if you remember that and use it to your advantage you can avoid a fatal mistake most forex traders make.
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