Tweaking the value of the indicators is a very challenging task. Without having proper knowledge about the different value of the indicators you should never try this. Many novice traders have lost their entire investment due to faulty settings of the indicators parameters. Before we teach you the proper way to tweak the value of the indicators setting you to need to understand a few basic things. There are two types of indicators in Forex market. These are:
- Leading indicators
- Lagging indicators
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The leading indicators will always generate early signals to the retail traders whereas the lagging indicators will generate late signals. Being a new investor in the Singaporean trading community you need to understand the importance of default settings of each indicator. The default settings tend to work great in most of the major currency pairs but still, you have room to improve your trading edge. To do so, you must tweak the value of the indicators reading.
When it comes to tweaking the value of any indicators, you must work with the lagging indicators at the initial stage. You can’t find any good trades by tweaking the value of leading indicators without having extensive experience. So what are the most popular lagging indicators in Forex market? These are a simple moving average, exponential moving average, weighted moving average, etc. When you deal with the value of these indicators, you have to use two moving averages to get the best possible trade setups.
Real life example
In order to understand the concept of tweaking the value of lagging indicators, we are going you an example. Let’s consider 100 and 200 SMA in the daily chart. The SMA will be a little slower compared to the 100 SMA and thus the 100 SMA is our lagging indicator here. If you tweak the value of the 200 SMA, you won’t be able to execute quality trade in the best Forex trading account. Try to use a different value of the 100 SMA. Some traders prefer to use the 55 SMA along with the 200 SMA. The setting greatly varies and you need to use the demo account to find the best, most suitable settings.
Using the demo account
Before you start to trade the real market with a tweaked value of the SMA, you need to back-test the trading strategy. Never try to trade the market with real money unless you have demo back-tested the trading strategy. Try different settings of the SMA and see how things work. Once you manage to make consistent profit for at least 2 months with the new settings of the indicators, it’s time for you to trade the real market.
Dealing RSI and Stochastic
Many experienced traders often tweak the value of the RSI and stochastic indicators to trade the cross pairs. Just like the moving average trading system, you need to back-test the new settings in the demo account. Always remember, a higher period tends to generate better results when it comes to oscillators. Those who are completely new to the trading profession should understand the fact oscillators are leading indicators. Unless you have extensive experience with the technical part of the trading industry you should never tweak the value of leading indicators.
Trading with managed risk
By tweaking the value of the indicators reading you can easily find great trades with an extreme level of precision. But this often leads to overtrading the market. Some people often become overly confident with their trading system and start taking a huge risk. This is where they make the biggest mistake in their life. No matter how well you understand the market, you should never risk more than 1-2% of the account balance. Try to trade this market in a safe way so that you can easily deal with the unexpected loss. Always back-test your trading system once you start to lose more trades.
