When it comes to online trading, there are a lot of potential pitfalls that traders can fall into. If you’re not careful, you could lose a lot of money in a short amount of time. However, if you follow the right signs, you can avoid these mistakes and pot potential opportunities that you might not have otherwise noticed and thus make a lot of money while trading online.
However, if you are new to this entire concept, then you need to take some time to learn the ropes before diving in and risking any of your hard-earned money. The last thing you want to do is make a rookie mistake that could cost you dearly.
To help you out, here are the most important signs to look follow when trading online:
Understand Pin Bars
If you’re going to trade online, you need to have a firm understanding of what pin bars are and how they form. In a nutshell, pin bars are one of the most important technical analysis tools that traders use and they can be extremely helpful in predicting market reversals. This particular chart pattern is formed when the open, high, and close of a candlestick are all very close together but the low is significantly lower than the other three prices. This indicates that there is a lot of selling pressure in the market and that the trend might be about to reverse. When you see a pin bar forming on a chart, you should pay close attention to it and consider entering a trade.
There are three different pin bar types that you should be aware of and they are as follows:
- The bullish pin bar has a small body and a long tail that points upwards. This indicates that the market is about to move higher.
- The bearish pin bar has a small body and a long tail that points downwards. This indicates that the market is about to move lower.
- The last type of pin bar is the tweezer top or bottom which is formed when there are two candlesticks with small bodies and long tails. The second candlestick’s tail should be inside the first candlestick’s tail. This is generally considered to be a very strong reversal signal.
Look for Candlestick Reversals
Another sign to look for when trading online is candlestick reversals. Candlesticks are one of the most popular technical analysis tools and they can be very helpful in predicting market reversals. There are a few different types of candlestick patterns that you should look out for, but some of the most important ones include the hammer, the inverted hammer, the shooting star, and the engulfing pattern.
Each one of these patterns has a different meaning, but they all indicate that the market might be about to reverse. If you take your time to learn more about how to read candlesticks you can start using them to your advantage and make better-informed trades.
Use Fibonacci Retracements
While Fibonacci retracements are not necessarily a sign, they can be extremely helpful in finding potential trade opportunities. Fibonacci retracements are technical analysis tools that help traders find support and resistance levels. They are based on the Fibonacci sequence, which is a series of numbers that starts with 0 and 1, and then each subsequent number is the sum of the previous two. Fibonacci retracements are created by drawing horizontal lines at certain percentages of the most recent move.
The most common levels that traders use are 23.6%, 38.2%, 50%, 61.8% and 100%. If the market is retracing and it hits one of these levels, there is a good chance that it will start to move in the original direction again. However, you should always wait for confirmation before entering a trade.
Use Pivot Points
Pivot points are another technical analysis tool that traders use to find potential trade opportunities. They are similar to Fibonacci retracements in that they are based on the Fibonacci sequence, but they are a bit more complex. Pivot points are created by taking the high, low, and close from the previous day and then applying the Fibonacci formula to them. This will give you a certain number of levels, which are typically referred to as the daily pivots. Depending on where the market is concerning these levels, you can use them to predict where it might go next.
Keep in mind that pivot points only work on a daily timeframe, so you’ll need to be patient if you’re using them.
While there are many different signs that you can look for when trading online, these are some of the most important ones. If you can learn to recognize these signs, you will be well on your way to becoming a successful trader. Just keep in mind that these are only signs and not the guarantee of a successful trade. You still need to do your research and make sure that you are making informed decisions before placing any trades.