Professional traders always prefer to trade major chart patterns. A chart pattern trading strategy is extremely profitable and it allows retail traders to secure a big profit from a single trade. But if you look at novice traders, you will notice that they hardly trade with the chart patterns. Some rookie traders in Denmark often say chart pattern trading is very hard.
In this article, we will teach you the perfect way to trade the major chart patterns. After going through this article, you can trade the CFD market with an extreme level of confidence.
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Identification of the chart pattern
Before you look for trading signals, you need to identify the major chart pattern. The rookies often start with the complex chart pattern and make things worse. To make the trading process easier, novice traders should start with easy chart patterns. For instance, they can trade rectangle and triangle chart patterns. After learning to trade this chart pattern, they can move to the continuation chart pattern trading strategy.
Breakout in the chart patterns
Trades are executed when the price breaks a major chart pattern. Very few traders use the price action signal to get confirmation of a breakout. To improve your trading accuracy, you need to learn about the basic candlestick pattern. Once the price breaks a major chart pattern, look for the price action signals. By using the price action confirmation signal, you can easily execute high-quality trades and make a decent profit in the most complex state of the market.
Use a premium platform
Trading the CFD market might seem an easy task but you need to follow some basic rules. For instance, you need to trade with an elite broker like Saxo. Without choosing a good broker, you will never access to the robust trading platform. If you use a low-end trading platform, you will not be able to identify the major chart patterns with a high level of precision. Most importantly, you will become confused about the market state and make silly mistakes. Try to use a trading journal so that you can identify the mistakes. If possible, learn the use of the modern tools available in the trading platform by using a demo trading account.
Impact of the news
Most of the major breakouts take place after the release of the major news. If you are good at market analysis, you need to study high-impact news with a high level of precision. Never aggressively take trades. as you are going to make things worse. Try to study the important market details so that you can execute high-quality trades. Right after the major news release, you should be spotting the major breakout in the chart patterns. So, learn to analyze the fundamental details so that you can execute high-quality trades.
Chose the higher time frame
Being a chart pattern trader, you should be taking the trades in a higher time frame. If you evaluate the trade signals in the lower time frame, you are not going to get any good results. You will be spending more time dealing with the false break. Though a higher time frame trading strategy is extremely boring, it is extremely effective in chart pattern trading. Start with the 4-hour time frame. Once you feel comfortable trading in the 4-hour chart, trade the daily and the weekly chart.
Trade with a high risk to reward ratio
The professional chart pattern traders always trade the market with a high risk to reward ratio. If you want to protect your trading capital, you should maintain a 1:3+ risk to reward ratio in the trades. Without following these rules, it will be very hard to overcome the losses. So, learn more about the risk management techniques so that you can improve your risk to reward ratio in chart pattern trading.