Chart pattern trading strategy allows smart investors to make a big profit in any market condition. With the help of the major chart pattern, a trader can find reliable trade signals in any kind of market. It can help an investor to find the reversal point in a major trend. Even after having so much benefit, the rookies often complain that the chart pattern trading strategy is not suitable in the long run. Now the ultimate question is, can we make a big profit using the chart pattern without facing any major obstacles. The answer is YES. But you have to train yourself properly to use the major chart pattern effectively. Unless you do that, you will have the same complaint as a rookie trader.
We are now going to discuss some key steps which you should follow as a professional trader. If you follow the steps, you may expect to make some significant progress as a chart pattern trader.
Identifying the major patterns
To identify the major chart patterns in the market, you should rely on the higher time frame. If you rely on the lower time frame, you are never going to earn money as a professional trader. People often mess things up and fail to do the proper analysis as they study the lower time frame signals. But in the lower time frame, you will find too many patterns. And identifying the valid pattern is going to be a very big challenge. To overcome such critical issues, you should be looking for the chart patterns in the higher time frame only. When you do that, you will become much more confident with the trade setups.
Merge it with price action signal
Before you take the trades based on the major chart pattern, you should merge it with the price action confirmation signals. When the retail traders start integration of price action trading strategy with the chart pattern trading method, they become extremely skilled with their trade execution. Navigate here and learn more about the importance of quality trade execution in the trading business. Being new to this market, you might have some trouble learning about the price action trading strategy. But you can easily do that by using the demo trading account. Never feel shy to practice in the demo account in the learning stage. Rather, you should thank the high-end brokers like Saxo for offering such free learning environment.
Test your efficiency
As you learn the basics of the chart pattern trading method, you should check your efficiency in the demo trading account. Without testing your efficiency you should never try to trade the market in a real account. For that, you just need a paper trading account. Trade with the virtual dollar and see if you truly can make a profit by using the chart pattern technique. If you fail to make a regular profit, chances are high that you are taking the trades at the wrong time. If not, you might have some other problems. You need to assess the losing trades fix the problems in your trading system.
Managing the risk
Being a professional chart pattern trader, you should be extremely good at managing risk. Without learning to manage the risk effectively, the chart pattern trading method is never going to work. You will keep on losing money most of the time. Eventually, you will start blaming the market. The minimum risk to reward ratio for each trade should be more than 1:4. And at the initial stage, you should be looking to trade the continuation patterns only. Stop taking more than 2% risk in the trades. If you do so, you are not going to have a pleasant time in your trading profession. Unless you have a stress-free environment, you should not be expecting big profits in this business.