Moving averages are just the average of the past prices. What this means is that moving averages are lagging in nature. Most traders use moving averages crossovers which are just a sure way to lose. But if you use these moving averages in an unconventional manner, you will see they work very well. Watch the webinar recording below that explains 27 moving averages that most traders don’t use!
https://youtube.com/watch?v=fVC4yNJiOoA
Did you read my last post on how to trade the FOMC Meeting Minutes? The recent FOMC Meeting Minutes did not move the market much. It is just like that. Sometimes these news releases shock the market and sometimes market just ignores them. Moving averages are not helpful when you are trading the news. Candlestick patterns are very important when you are trading news. You should also watch this recorded webinar that explains in detail how you can use candlestick patterns in projecting your profit targets.
Now whatever strategy you use, always remember to keep your risk small. The trick lies in catching the big moves in the market with a small stop loss. For example, suppose you have a strategy that risk $20 and makes $200. The winrate is only 50%. How much you will make in 10 trades? Since the winrate is 50%, on average you are going to win 5 trades and you are going to lose 5 trades. This means you are going to make $1000 and lose $100 on average in a series of 10 trades. So on average after every 10 trades you should be making $900.
This is how it is. When we are trading, we are dealing with probabilities. We cannot win each trade. But if we can win 50% of the trade, it means we will be winning 5 trades on average in 10 trades. You need to understand the Law of Large Numbers when it comes to trading. If you make 100 trades, you will come to know the real winrate of your trading strategy. As said above the best trading strategy tries to capture big moves with a small stop loss. If you can find such a strategy that risk only 30 pips and makes 300 pips each time, you have a very good strategy. With such a strategy you only need a 50% winrate to make 1350 pips in just 10 trades.
How to develop such a strategy? You can develop such a strategy by using moving averages and candlesticks in an unconventional manner. Yes if you keep on using moving averages and candlesticks in conventional manner you will never succeed. You will only get an edge when you start looking at moving averages and candlesticks in an unconventional manner.