After knowing the two previous tips, let’s continue our discussion about the effective steps to avoid fake signals.
Let’s check out 5 Effective Steps to Avoid Fake Signals:
3. Beware of News & Events
High-impact economic news is able to move prices without warning from any prior signal. If you catch a signal when or around the time of the news release, chances are that the signal is already invalid in following market volatility. That is because of the volatile market sentiment during the high-impact news release.
Therefore, you can use the forex calendar to avoid market conditions with a high level of volatility and risk. High impact news will generally be marked with three-star markers, three bull’s heads, red and the other highest scale.
4. Reduce Overtrading
The danger of the risk of false signals will haunt you if you are a trader with a desire to enter the market with high frequency. The Forex market is indeed one of the biggest markets with trading opportunities all the time, no wonder that many novice traders are always tempted to open a position every time a signal from an indicator or a price action pattern appears on their chart pair.
According to Daily Price Action, trading less is a good thing. It’s one reason the daily time frame will improve your trading. By slowing things down, you’re able to plan trades ahead of time, which removes emotion from your trading.
Besides, some professional traders say that overtrading or impulses to continuously open and close positions based on low-quality signals will not only expose the risk of loss to your account margin but also mental stress that will lead to prolonged frustration. Additionally, novice traders must learn to be patient and control their impulses to only react when the signal of the highest quality appears.
5. Avoid Inconsistent Trading Systems
Over time, a trader will develop a trading system that is different/unique from other traders. The key to the success of a trading system is the consistency of the method every step of the system.
In general, novice traders still do not have an established trading system. They usually only copy and change trading systems from other professional traders just to make a profit. The problem is, understanding of one trader cannot be adopted outright by other traders. As a result, the novice trader just gets a false signal from the misuse of a trading system.
Conclusion
False signals are actually the “natural” part of trading activities. The flight hours and skills of each trader will vary from one another in responding to these false signals.
The five steps to avoid false signals above are only a basic guide. Traders can still develop their own anti-false trading system trading.
Read more: Stop Order, What Are the Advantages?
