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5 Technical Trading Rules Explained

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Trading has become an increasingly popular way to make money. There are lots of trading opportunities every single day, no matter what time of year it is or where you live.

However, trading can be a very high-risk activity and many traders quickly find themselves on the wrong side of a cutting-edge trend and lose everything they put into their trading account. No one wants to lose money, but losing your shirt in the trading world is not something that needs to happen.

If you are interested in forex or stock trading, make sure you educate yourself on the basics of how it all works. It’s also important to learn about common practices around buying and selling different assets. A large part of being a trader is understanding the technical aspects of what you are trading. This means that, before you even make a single trade, it’s important to learn about some of the most common technical trading concepts and strategies.

Once you understand how these work and how they can help on your journey to success as a trader, you will be that much closer to reaching your financial goals.

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1) Make Friends with the Trend

There are two types of trends – a positive trend and a negative trend. As a new trader, it can be very difficult to determine which trends you should be going along with and which ones you should avoid. Generally speaking, a positive trend will continue for a long period of time due to market conditions, while a negative trend can be broken with the right indicators.

You should only trade when the price is moving in an upward or downward direction. Keep in mind that these trends are often short-lived and you need to make sure you get out before your position becomes too late (i.e., locking in major losses).

The idea here is that you should make sure the trend is strong and make reliable upward movements before jumping in. If it’s a negative trend, you need to be able to identify a possible reversal point and ensure that your position is going to be profitable.

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Trends can be fairly common in the market, but you need to make sure that your trend is strong enough to go with before you start trading. This means that most of the time it will not be very profitable or worthwhile for you to trade.

The worst thing that can happen when trading is jumping into a trend only to find out it’s not as strong as you had originally thought. If this happens, you’re going to find yourself losing money and spending a lot of time trying to recover your losses.

Trens do not last forever and they can fail quickly. If you have a short position, then that allows you to take advantage of the trend reversal. The trend may continue to fall down after it has been broken, so you have to be careful not to keep your position open for too long when the trend changes.

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3) Don’t Ignore Fibonacci Numbers

Fibonacci numbers are a common indicator in technical analysis that helps traders determine where key support and resistance levels may exist. These are particularly useful when you are looking at a shorter time period, such as 10 minutes.

To determine where the Fibonacci levels may be, you need to look at an important trend line that has already been identified on your charting platform. You want this to be a significant area of resistance or support. Then all you have to do is take the key opposition levels, which can be determined by drawing a Fibonacci arc on your chart.

This will help you to identify where the price may reverse course. However, you have to keep in mind that these are not 100% accurate and they frequently occur near round numbers. For this reason, it’s best to combine them with other technical indicators and charting tools in order to come up with a more accurate trading strategy.

4) Make Sure You Use Multiple Time Frame Analysis

You always want to make sure you are using the right time frame when you’re looking at short-term or long-term trades. Different time frames have different effects on price action, so you need to ensure that you are looking at the right one.

If you are trading on an hourly or daily time frame, then the 10-minute chart cannot be as accurate for your trading strategy as a 60-minute chart. However, some traders will look at both the hourly and minute charts in order to get a better understanding of where the price is likely to go.

If you are looking at the hourly chart, then it’s important that you realize that there may be significant changes in price on a 10-minute basis. If you see these kinds of changes, it will help ensure that your trading strategy is geared more towards short-term trades (i.e., less than one hour) and that you’re using the right indicators.

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5) Understand the Concepts of Support and Resistance

Support is the price level where buyers are willing to provide enough demand so that the price does not go lower. Resistance, on the other hand, is when there are more sellers than buyers and this causes prices to stay at a particular level or move in an upward direction.

It’s important for you to understand these concepts because they can provide you with a better indication of the price direction in the future. Plus, if you can identify key support and resistance levels, then it will help you determine where the price is heading next.

If there is no strong support or resistance level at a particular point on your chart, then this may indicate that the price is not likely to go up or down anytime soon. There are times when the price may go back and forth between support or resistance levels in order to create a stronger likelihood of an upward or downward motion.

Therefore, you need to use multiple time frame analysis, keep an eye on Fibonacci numbers, and understand the concepts of support and resistance before determining your trading strategy. By doing this, you’ll have a better chance of identifying the direction that the price is going before it makes a significant move. Remember, don’t expect too much from any technical indicator or charting tool because they will not always provide accurate predictions. Be sure to combine them with other trading signals so you can create an effective trading strategy.


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Risk Disclosure:

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: 

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.

In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

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