Traders have long understood the concept of the market crowd. For many, it represents erroneous and inefficient trading decisions. If you think of yourself as part of the traders, it’s time for you to change your mindset. You should distance yourself from this abstract society.
If you are in the fortunate position that you can trade from home, it probably makes you feel independent from everything around you. However, are you really autonomous if all traders are tracking the same quotes and reading the same news as you?What makes you, and your trading performance, different from the crowd?
The problem lies in the common emotional state of investors, which results in many of them making opening trades in the same direction. If you want to break out of this mold of doing the same as what everybody else does and leave this unpleasant community as soon as possible, but you don’t have many skills, there are two specific rules you can follow.
Don’t make trading decisions at critical moments
Price charts provide a huge amount of useful information, and you can get even more data when you use oscillators such as DeMarker, Stochastic, and RSI. Each of these oscillators will show you three zones: oversold, overbought, and the zone in between them.
Many traders use oscillators to focus on signal lines when they are in oversold or overbought zones, and indicators often give the right signals. The problem with this approach is that a lot of traders use this strategy.
While this method often helps traders to make profits, sometimes many false signals also appear. To leave the crowd, it’s worthwhile to use these indicators to find the zone between the oversold and overbought areas where the market is balanced.
The DeMarker, Stochastic, and RSI oscillators will help you find the area where the market is balanced. Start making trades during the times that other traders are not so active.
This is not a big change, but many people find their own independence in making such a move. If you start trading in this new environment, is will be very useful and you will learn new things others don’t know, and this will eventually help you leave the market crowd.
Don’t Trade At Critical Moments
The market is at its most interesting during times of abnormally high volatility, but these are also the most dangerous times. An asset will determine its trend direction during such times.
Many traders lose huge amount of money due to these swaying movements. Bursts of activity very often happen at the moment news is released. This may either be news that is released unexpectedly, or during the normal economic calendar updates.
One example would be if the U.S. president unexpectedly imposes sanctions against another country. This often leads to a weakening of that country’s currency when it suddenly comes under pressure.
A breakout through important support or resistance levels also tends to lead to increased volatility. These benchmarks play an important role in the market.
Stock indices are traditionally the most active during the first 5 to10 minutes after a trading session has opened, and again 5 to10 minutes before it closes. This pattern is a result of the specific nature of trading these instruments. Avoid trading at these critical moments by keeping calm and don’t succumb to the hype of price spikes. There are plenty of solid opportunities available for trading outside these critical moments, and those trades will probably be a lot less risky.