U.S. Dollar / Swiss FrancEducation
Why trading with simple indicators for beginners is a bad idea.
Hello,
An idea that may strike some sense to "divergence" trading, and why you should not be trading reversals, when you are a beginner trader. There are about 5 divergences, indicating reversals inside this STRONG BULL TREND. And you could make money buying anywhere in the trend with a wide stop. Instead beginners are taught to trade reversal because they are "HIGH R/R". Yes, they are HIGH RISK, HIGH REWARD. Not LOW RISK HIGH REWARD.
The idea that a HIGH RISK TO REWARD RATIO is good, is so misunderstood in the trading community. Low risk, high reward DOES NOT EXIST in trading. There are more components to trades than just the P&L. There is also a thing called PROBABILITY. High risk, low reward means HIGH PROBABILITY. Low risk, high reward means VERY LOW probability. The reason is simple: There has to be an institution taking the OTHER side of YOUR trade, in order for you to make money. When shorting a bull trend you can ONLY expect to make SCALPS. Do not get into the rabbit hole of burning through you capital, hoping for reversals. You don't have enough capital to keep shorting the upside. Just go long, when trends like this occur. Stop looking for reversals, get into a SMALL position and keep adding as it is going up.
Best to you, traders. Have a wonderful rest of the week.
An idea that may strike some sense to "divergence" trading, and why you should not be trading reversals, when you are a beginner trader. There are about 5 divergences, indicating reversals inside this STRONG BULL TREND. And you could make money buying anywhere in the trend with a wide stop. Instead beginners are taught to trade reversal because they are "HIGH R/R". Yes, they are HIGH RISK, HIGH REWARD. Not LOW RISK HIGH REWARD.
The idea that a HIGH RISK TO REWARD RATIO is good, is so misunderstood in the trading community. Low risk, high reward DOES NOT EXIST in trading. There are more components to trades than just the P&L. There is also a thing called PROBABILITY. High risk, low reward means HIGH PROBABILITY. Low risk, high reward means VERY LOW probability. The reason is simple: There has to be an institution taking the OTHER side of YOUR trade, in order for you to make money. When shorting a bull trend you can ONLY expect to make SCALPS. Do not get into the rabbit hole of burning through you capital, hoping for reversals. You don't have enough capital to keep shorting the upside. Just go long, when trends like this occur. Stop looking for reversals, get into a SMALL position and keep adding as it is going up.
Best to you, traders. Have a wonderful rest of the week.
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