Chart pattern trading method is by far the most effective way to secure big profits in the market. People who have strong knowledge about the chart pattern trading technique, tend to do well most of the time. In fact, they can trade the major reversal with a high level of accuracy and manage to make a big profit without having any major trouble. But the rookie traders always keep on making some silly mistakes and thus they fail to take real advantage of the chart pattern trading method. Eventually, they get confused and stop dealing with this market.
The professional chart pattern traders know the exact way to execute high-quality trades. They have excellent risk management skills and they know the perfect way to take trades. To trade like them, you need to avoid some common mistakes. Let’s learn more about the deadly mistakes in chart pattern trading.
Selecting the wrong time frame
You should not be looking for the major chart pattern in the lower time frame. The patterns generated in the lower time frame are not that accurate and it often confuses the retail traders. But if you assess the conditions of the professional trader, you will never find them taking the trades in the lower time frame. They are keen on their trade execution process and they know the perfect way to take the trades. Usually, they look for reliable candlestick patterns in the daily time frame and thus manages to find high-quality trade signals.
Taking trades too early
Being a new chart pattern trader in the Forex market, you should be waiting for the perfect breakout. Never take the trades too early without getting the confirmation. For a bullish breakout, you need to have a candlestick that has a closing above the resistance of the chart pattern. Similarly, for the breaking breakout, you need to have a closing below the support level. But most traders fail to analyze the breakout candlestick patterns properly and open the trades in the market. But if you do like this, you might have to lose money from most of the trades. It would be wise to wait for the clear breakout and you make take the trades after the retracement takes place. By following this technique, you can avoid big losses in the chart pattern trading technique.
Ignoring the news
As a chart pattern trader, you should never ignore the importance of major news releases. If you do so, you are going to mess things up most of the time. Once you learn to evaluate the news data along with the technical factor, you will find much more reliable trade signals in the market, and thus executing the trades will become much easier. Some traders often say that analyzing the news data is a tough task. But we strongly believe that they don’t have the devotion to learn the basics of news analysis. To learn news trading from the scratch, you may get a professional demo trading account and analyze the price movement right after the major economic announcement. By doing so, you should be able to master the news analysis process within a short time.
Ignoring risk management rules
Being a chart pattern trader, you should always follow the proper risk to reward ratio. Failing to maintain a decent risk to reward ratio in the trades can cause big trouble. You may think that you can trade with high risk as you are analyzing the major chart pattern in the higher time frame but this is going to be a very big mistake. If you start focusing on the higher time frame, you will start losing money most of the time. In fact, you will become confused with your actions and thus you will fail to recover the losing trades in a smart way. So, always trade the market in a conservative way and never expect that you won’t be losing any trades while using the chart patterns.