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Is one trading signal sufficient?
Written by: PaxForex analytics dept - Tuesday, 24 March 2015 0 comments
Those of you who have browsed the internet in order to find more information about forex trading as part of your educational quest may have come across an increase of threads and posts by other new traders who ask questions about certain things they have observed such as a divergence or specific candlestick formation and then wonder if they should go ahead and trade it. Discovering those things is a good first step in sharpening your trading skills.
Is one trading signal sufficient? No, trading based on just one trading signal, bullish or bearish, is not recommended as one signal alone does not equal a successful trading strategy. Those who enter trades based on just one trading signalwill likely end up with losses over the long-term as it is not sufficient to point towards a direction. Often you can look at the charts and find signals going in both directions which is why further analysis is required.
Trading based on just trading signal is just slightly better than guessing with a 50-50 chance and therefore forex traders should never rush into trades based on those odds. Remember that
patience is a key attribute a forex trader needs to possess in order to succeed. A proper analysis requires time and once one clear signal has been identified further analysis in that direction is required. A successful forex trader always has several trading signals confirming the trade before placing it.
What should you do if you can only find one trading signal in your chart? There are a number of things which you can do and they all depend on your chart. In case you are trading free of indicators you should educate yourself more on chart patterns, support/resistance and candlestick formations. All of those will give you a lot more insight about your trade and all of them offer trading signals. The above are the three key signals offered from pure price action.
Those of you who use indicators and can’t find signals either need to study the indicator properly or if there is no further signal move on to the next chart. There is no need to feel pressured into taking a trade based on just one trading signal. Keep analyzing the charts until you find multiple trading signals confirming the trade you wish to take. It takes time to build a proper trading strategy and identifying developments in your charts is one very important step.