Trading too complex a strategy with many indicators?: When beginners enter into the trading journey, most of them start getting knowledge about every indicator like they are very important for trading. But, whether a trader should go with a complex indicator or simply follow price action for trading?
If you are also confused with the same question, you will get your answer in this blog.
Before I answer the question, let’s understand what strategy is and why it is important.
What is Strategy?
Trading strategy means you use one method or any candlestick charting patterns along with indicators or without indicators that give high probability trades.
When a trader starts his trading journey, the first thing he needs is to have a strategy that works for him and helps him to take the right decisions to enter and exit the trade.
Complex Vs Simple trading strategy
Trading strategies are useful for making the trading process easier and clear. So while making a strategy first you should keep in mind that you are going to trade using the strategy every time and practicing the strategy, should give you the confidence to execute the trade in a live market.
When you use a strategy based on an indicator, the chances of getting false signals are high. Indicators don’t consider wider market trends and with more indicators, you will be confused and it can lose your confidence to trade in a live market.
The market is very vast and normally most of the stock price move in line with each other when the market is in trend.
Traders can easily capture the trend and momentum by following price action. So as compared to the indicator-based strategy price action base strategy performs better to get consistent results.
Price action works in all markets in the world and gives clear signals so that you can trade with confidence. You can keep your trading process simple and effective with price action.
How to keep your trading strategy simple and effective?
To trade simply and get an effective result first you need a clear chart without too many indicators. You can use the moving average and volume for confirmation if you want.
Now Use one trading strategy that gives a clear structure that gives a clear signal about what trade could happen.
You are trading using a simple trend line break-out. It is called break-out trade and you confirm with high volume. Your entry point is just after the break-out happens and you keep stop-loss below the trend line.
In this strategy, you are already having a clear structure. You know before entering into a trade that trade could happen. This is your defined structure.
So, with the above example, you can see that the strategy is very simple but has a defined structure. Try to find out a strategy like this, keep it simple, and enjoy consistent results for a long period.
Follow and Maintain Risk to Reward Ratio
Risk is the amount of money you are ready to lose against the Reward you are going to receive if your trade was successful.
Once you are clear with trading strategy and what is the right entry, stop-loss and target. It is your decision whether you should enter into a trade or not. As per stop-loss if you are getting the ideal risk-to-reward ratio with the trade setup you can go for it.
But if you are not getting a minimum of 1:2 then, you need to find another trading setup with a favorable risk-to-reward ratio.
To know more about Risk: Reward you can check the link below. https://tradingfuel.com/importance-of-risk-management-system-in-trading/
Before you start trading for the day, plan for it and focus only on the stock which you have selected for day trading. If you found a trade setup with your selected stocks you can go for it.
According to your stop-loss and target level, take a decision based on how much R: R you are getting. If it is very trying to avoid the trade and if the trade setup makes any sense you can enter into trade.
So, Follow a simple strategy and get effective results. With too much complex strategy you will always be disappointed. We hope that you like our blog “Trading too complex a strategy with many indicators?”