Opening a trade is possible only after analyzing the market situation. There are many methods for accomplishing this task. But almost all traders use technical analysis . Except, perhaps, for those who trade on the news. But there are few such traders.
Today we will talk about technical analysis. Specifically, what are the main mistakes traders (usually beginners) make in the practical application of technical analysis.
At first glance, they may seem insignificant. However, such little things change the course of trading for the worse. Therefore, it is better to immediately turn your attention to these popular mistakes in order to exclude their negative impact on trading at the start.
Trading by levels is a basic method of trading, the effectiveness of which has been proven by more than one generation of traders. But for successful trading, it is very important to learn how to correctly identify them on the price chart. The main mistake of some novice traders is to draw levels not by candlestick extremes, but by their bodies. It cannot be said that this is a very serious defect. But such a line formation can be reflected on the trading account, since it makes it difficult to correctly determine the entry point and identify a false breakout.
Candlestick patterns and patterns can tell a lot about the market situation. However, trading on them requires special care. If you see, for example, a trend continuation pattern on the chart, then you need to see if there is a strong level on its way. He can confuse all trading plans. The trend movement will not continue and the trade will be closed with a loss. There is no need to rush to open an order immediately after the formation of a particular candlestick pattern. You need to wait for the confirmation of its signal and see how the price will behave near an important level.
Trade with dubious patterns
Technical analysis includes a large set of tools, including patterns. The most popular ones are easy to remember, and even a newcomer to the market very soon begins to “read” them on the chart. If the pattern has formed in accordance with the rules, then it catches the eye at a glance at the chart. But sometimes the trader tries to see on the chart what he wants to see, and not what it really is. He marks a candlestick pattern that does not fully comply with the conditions for its formation and opens an order. This approach creates risks for the deposit.
Striving to trade on small TFs
Novice traders, in their desire to make money as quickly as possible, choose small timeframes for trading. But you need to understand that technical analysis works better on large time frames (from hourly and higher). This is due to the fact that on such charts the influence of the so-called market noise is minimized. This allows you to receive more accurate signals.