Trading the markets can be incredibly appealing, there are many options to generate a handsome profit. But most traders make mistakes because they don't have a knowledge of the basics to trade currency, stocks, futures, bonds, or commodities. This could result in unnecessary losses for you. Although making mistakes while trading is the part of the game, there are some common mistakes that you can easily avoid if you are acutely aware of these errors.
If you are a newbie or season trader that is price action-oriented, you may find much available information on the Internet or otherwise. Hence, the chances of making one of these common mistakes are much higher if you do not you have the right information. Here are three of the most common price action mistakes made by traders which can be easily prevented.
In trading, most people assume that all chart pin bars are formed for the same reason - price action. This is the first mistake made by most individuals. In fact, pin bars are a type of price action pattern that many of traders will see displayed on charts, and the majority of them are going to assume that all pins will cause a trend reversal in the market.
This is because these traders have been told that all pin bars are usually made for the same reason. If you are using pins as your strategy, you need to avoid the pins that form after a significant market movement has occurred.
A further mistake is that most traders think that lower low or higher high is going to signal a reversal or continuance of a particular trend. This is another mistake made by most of the traders. In fact, most of them are using the 'Dow Theory' technique when doing the trading.
If you plan to use this strategy, you should wait until the market has broken through any recent high or low and has flattened out. In fact, the Dow Theory is a technique of analyzing the market to determine trends in the market, and it will show you when the market has changed directions, not a reversal.
The traders who are price action have another misconception that they should always trade where there is a long-term trend. In fact, so many traders are placing their trades in line with a long-lasting trend. But it could lead to many of them being a losing trades and by being stopped out very often.
Although there is a high chance that the trend will continue, there have been times when the market would move against these trends. To protect yourself from losses, trade in the direction of the trend using larger time frames which by the way are the best time frames to trade the pin bar. So you should be looking at pin bars in the 60 minutes, 4-hour, and daily time frames, and only initiate the trade whenever a market momentum change has long been noted.
The pin bar - price action can be another essential ingredient in learning to trade the markets. There are certainly hundreds of approaches you may use with price action trading. The most important thing is that you choose a product that meets your needs.
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