The Most Overlooked Indicators in Day Trading

The Most Overlooked Indicators in Day Trading

The Most Overlooked Indicators in Day Trading 1024 576 Steven Dux

If you’re searching for help on how to use Day Trading Indicators to build momentum… you’re in the right place — although what I share with you may come as a surprise!!

More on that in a second…

Let’s first set the scene — along with your strategy and plan, another important tool that will help you understand the markets better is indicators. What are they, exactly? Simply put… you use them to gain an understanding of the supply and demand of stocks (and the market as a whole).

Indicators are used to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.

While many traders prefer price action as their main method of analyzing the market, there are a lot of traders who use technical indicators.

Technical indicators add more filters that can include a lot more objectivity.

Most traders use some indicators that have become popular over the years. As beginners, the first few indicators you’ll come across are Relative Strength Index (RSI), Moving Averages, et al.

For a new trader, it can be quite overwhelming to find the right indicator. Some day trading indicators can yield conflicting and confusing signals.

This can make trading stressful and ineffective!!

Indicators should only be used as a guide alongside your strategy and plan.

They should not be your entire strategy or plan itself!

In addition to that, a lot of these popular indicators don’t really work for new traders. We shall discuss the reasons why and also what indicators you should focus on for 2021 and beyond.

Some Commonly Used Indicators…

Search online and you’ll find some indicators appearing again and again.

In a nutshell, different trading indicators help you track different things:

  • The direction of the trend
  • The momentum of the market
  • Volatility or the lack of it
  • Volume

Let me reiterate before we go into some of the most commonly used indicators: these common ones will not work for you.

Their average win rate is about 50-60% which is not at all good enough .

We shall shortly get into the reasons why these indicators do not work. However, it’s first important to understand what these common ones are so you can then avoid them 😉

Moving Average

Moving Average (MA) is an indicator employed to identify the direction of a current price trend, without the interference of shorter-term price spikes.

It smooths out price data by creating a constantly updated average price.

With the use of the MA indicator, you can study levels of support and resistance and see previous price action (i.e. the history of the market).

Moving averages don’t make predictions about the future price of stocks.

All they do is tell us what the price is doing, on average, over a period of time.

Essentially this means you can also determine possible future patterns by analyzing this data.

Moving Average Convergence Divergence (MACD)

Moving average convergence divergence (MACD) is an indicator that depicts the relationship between two moving averages of a stock’s price.

It’s employed to reveal changes in the strength, direction, momentum, and duration of a trend in a stock’s price.

Relative strength index (RSI)

The Relative Strength Index (RSI) is an indicator that provides us signals about bullish and bearish price momentum.

An asset is usually considered overbought when the RSI is above 70% and oversold when it is below 30%.

Why Most Popular Indicators WILL NOT Work For You

The indicators you find while searching online are the ones that have been popular the last few years. They don’t really work. Their average win rate is about 50-60%. This is not good enough!!

Personally, they don’t work for my style and also don’t work for my students (in my course we aim for higher win rates ). I’ve been testing them for a very long time for this very reason.

It’s tough selecting day trading indicators that work for your style and your plan.

Whatever is available out there are standard indicators that have been fine-tuned to give the most optimum results on past data. They do not take into account changes in market behavior.

Plus, all these indicators have been formulated and invented by people who have been trading in this market for a long time. These indicators might have worked for them back in the day, but they don’t work so well anymore.

The reason is, there are way too many people who know about these indicators and the same patterns. There are too many players doing the same thing, and 94% of them lose money. You can’t expect different results by doing the same things that they’re doing.

You have to stand out!

After trading consistently over the last few years, I’ve observed that after 2020-2021 the market has gone through a significant change compared to the trading years before. This is also why the older, popular indicators don’t work anymore.

The most important thing you have to focus on now is trading psychology.

The Importance Of Trading Psychology

Indicators can make it simple to understand pricing information, as they provide signals based on trends, volume, et al. But they often ignore trading psychology .

Indicators are complementary tools and should not be used on their own. They have to be used in conjunction with your plan, strategy, and understanding of trading psychology.

In order to become a profitable trader, you have to focus on trading psychology!

Even though trading is based on numbers, statistics and logic, we cannot overlook the aspect of psychology.

One of the best things you can do to help your new trading career is to become aware of your own psychology. It’s important to study how you deal with different situations and how you can improve them.

Since our emotions, biases, and perceptions are so ingrained in our psyche, it isn’t easy to remove them from your professional life. That is true for trading as well. Your psychological mindset is bound to have an influence on your trading. That is the nature of the human mind.

Both global and regional events can affect the day-to-day functioning of the market, and so it’s important to understand your own psychology and learn to manage your emotions.

Once you acknowledge these things, you’re able to figure out what to do to plan accordingly.

You’ll make decisions more consciously and confidently.

There are 4 important psychological trading traits that will help you build this roadmap.

1. Trading Confidence

When beginners first start trading, one of the biggest psychological challenges they encounter is confidence. I struggled with this too, when I started out 6 years ago.

There can be a lack of trading confidence when you first get started, as you’re still learning.

The way to handle this is to track enough statistics.

The minimum samples per pattern you track should be 100. It’s also important not to track everything at once, but instead, divide them into categories and track them like that. Watch the statistics videos on my Youtube channel to learn how to track statistics the right way.

Check out this one on Entry Level Stats Tracking ⇒

 

While tracking patterns, make sure you focus on just 1-2. In fact, ideally, just focus on one.

If you’re anywhere between $3,000 to $30,000, try and stick to tracking one pattern at a time and give it your whole focus. This approach works because it ensures you’re not risking too much, meaning your trading confidence doesn’t get beaten down.

2. FOMO (Fear Of Missing Out)

Fear of missing out is one of the most common mistakes every single trader makes.

It’s very common to feel FOMO when there’s hype surrounding a certain trade. You see it doing well and everyone is buying it so you feel you must too or you will miss out.

Or, you missed out on a stock and now you feel that somehow the money must be earned because the market now owes you.

That is one of the worst outlooks to have while trading!!

If you find yourself with this sort of trading psychology, that’s when you need to go back to basics. Start tracking statistics in two different ways.

  1. Frequency of the occurrence of the pattern.
  2. The average return on the pattern.

This will help you figure out how much you can potentially gain per year. Once you know how much money you will eventually make, the effects of FOMO disappear.

Patience is essential for success in trading and there’s no room for emotions like FOMO.

3. Focus on the outcome

As a beginner, you’ll likely focus on how much you want to gain rather than how you will get there.

If you’re focusing on how much money you’re going to make, your focus is on the results rather than the process. Focusing on the process, gaining experience, and tracking statistics will make you a good trader. Focusing on the result will get you nowhere.

When I’m trading, I don’t look at my potential profits (so I don’t really know much I’ll make in the end). I focus on pattern development. That’s all that matters.

It’s understandable that this is hard because making money is mainly what motivates most people to start trading. That is the goal, yes. But the process needs to be your sole focus.

4. Emotional Limits

Yet another downfall of comparing yourself to others is succumbing to emotional limits.

My suggestion for you is to practice yourself instead of getting caught up comparing your own trades with others.

I go into much more detail about this, in this article right here …

Avoid these 4 major trading psychology mistakes and you’ll be on your way to success.

The Most Profitable Day Trading Indicators in 2021 and Beyond…

The best indicators for day trading reveals to us what’s going to be the mood of the market during the upcoming time.

1: Volume

Volume is an important technical parameter that’s often ignored by beginners.

Volume can be used as an indicator to track the number of stocks being bought and sold over time. This helps us judge how the other traders perceive the market.

This then helps us understand the psychology of the market better!

High volume shows more interest in the stock and the presence of the buyers and sellers in that stock.

Low volume shows us a lack of interest in that stock.

The amount of volume can also tell us how the price of the stock is likely to behave. If the price is currently on an uptrend and volume is high, then the uptrend is likely to continue. When the stock is going down and there is an uptick in volume along with the ongoing downtrend then the stocks will carry on going down.

When the stock is going up in price and volume is going down then it indicates the interest of the buyers in the stock has shrunk and the spike in price is going to reverse.

In the same way, when the stock is moving down in price and volume is falling then it indicates the interest of the sellers has shrunk in the stock and the downtrend is going to reverse.

My biggest recommendation when it comes to indicators for 2021 is to study volume and add it to your analysis tools in order to improve your trading and chances for profits.

Especially because after 2020, the number of shares in the market has increased immensely.

You have to figure out the limit of intraday volume.

Let’s say, we have the average trading volume as 100-200 million. After tracking about 100 samples, we know the top limit for this volume is around 400-500 million. Once you know the upper limit, you can figure out when to start selling as it’s unlikely to go beyond that once it reaches that point.

So basically, volume helps you figure out whether to stay long or go short.

2: Pre-Market Volume

The second way you can use volume forecasting is premarket volume.

As an example, a ticker is trading at 1 million volume in the premarket compared to a ticker that is at 20 million volume. So we definitely can say that the second will trade at a much higher volume than the first one. If the premarket volume is so high, the trading volume too consequently will be high.

As a beginner, please make sure to pay attention to premarket volume as that can indicate eventual volume and price movements.

This will benefit your trading strategy and help you grow your small account  faster and in a steadier way.

Your Next Steps…

When it comes to indicators, it’s best to choose one that blends well with your strategy — and one that your mentor recommends.

Choosing the right strategies and indicators can make or break your trading career.

(and it doesn’t come easy in the beginning)

That is what a good mentor should guide you on.

Being such a mentor is what inspired me to create The Freedom Challenge.

If you’re ready to make an investment in your career, check out the course and make the right step towards a future with financial freedom.

And if you’re keen to learn more day trading tips, check out this Investing for Beginners series. I’m devoted to mentoring beginners in order to make day trading your primary source of income. I also invite you to take a few further steps with me:

  1. Subscribe To My Youtube Channel: this is where I share practical day trading tips and training on how to trade, as well as behind-the-scenes insights into the trades I make.
  2. Join My Newsletter: I write these emails for people who want to learn the basic Day Trading Tips and the practical steps they should take to get started.
  3. Join The Freedom Challenge: This is my flagship program for traders who want to level up and learn about the techniques I use, how to use them, and what to do to turn Day Trading into their primary income stream.

Leave a Reply

    APPLY TO THE FREEDOM CHALLENGE.

    Insert your name and email address to apply now!

    FREEDOM CHALLENGE

    FREEDOM CHALLENGE.

    If you’re new to all of this and have limited knowledge as to how the stock market works, I highly recommend you invest in The Freedom Challenge.

    APPLY NOW!

    x