How to evaluate the quality of the trade setup
Finding great trades is an art. Those who are making a consistent profit have learned the details of this market. But learning to trade the market like the pro-Singaporean traders requires time and hard work. If you trade the market with an aggressive approach, you are going to lose most of the trades. Though the traders always use a simple strategy to find the signals, they don’t know the proper way to evaluate the quality of the trade setups. In this article, we are going to teach you the perfect way to evaluate the trade signals.
The risk to reward ratio
Good trade signals will not reflect negative or low risk to reward ratio. The smart investors try to find signals with a 1:5+ risk to reward ratio. Though you might think to find such trade signals is impossible, switching to a higher period will change your concept. Just log in to the real trading account and try to find the signals in the daily period. You won’t have to trade the market with a poor risk to reward ratio. Since the traders are dealing with the lower period, they are placing the trades without analyzing the RR or risk to reward ratio. Unless you have 1:3 RR in the setup, you don’t have any good signals.
The direction of the trade
You trade direction must be in favor of the trend. The naive trader’s executions are always against the major trend. They are trading the major retracement in the Forex market. The elite traders always consider retracement trading strategy as the easiest way to blow up the trading account. So, if the direction of the trade goes against the major trend, you should not execute the order. Think about the long term goals and try to improve your skills by learning to trade with the major trend. Once you get better at trading, focus on the long term goals and trade this market with discipline. Think like the elite traders and place your trade with the major trend.
Analyzing the economic condition
You need to analyze the economic condition to determine the quality of the signals. If the economic condition supports your trade signals, you are dealing with a great signal. Does this mean, you have to learn fundamental analysis to find the best signals? Without learning to analyze the fundamental factors, no one can become a successful trader. You must blend technical and fundamental data to secure the best possible signals. Once you get better at the trade execution process, you should increase the risk factors to improve your profit potential.
Determine the stop loss
Setting up the right stop loss is the most important aspect of trading. Those who are trading with wide stops are losing their entire investment. You must learn to find good signals with tight stops. And for that, you should learn about the Japanese candlestick pattern trading. Using the candlestick pattern to find the potential trading zone at the key support and resistance zone is a very hard task. But once you learn to trade this market with discipline, you can expect to make a big profit without having any issues. Think about the worst-case scenario when you determine the stops for the trade. This will help you trade with low risk.
Are you comfortable with the signal?
The last thing which you need to consider is your comfort level. If you are not comfortable with a certain trade signal, probably the signal is not good enough to secure profit. You don’t have to trade just to participate in this market. Think about the long term goals so that you can make big profits with low risk. Try to find a low-risk trade setup so that you can trade with extreme comfort. Pushing yourself to the edge to earn more money or take some wild decisions is not going to make you a successful trader.