Which indicator to choose for your trading style

You should think a lot about your own trading style before you select indicators, since the set of indicators, which would be optimal in your situation, depends on your circumstances, abilities, experience and wishes.

We believe that there are 3 factors that influence selection of the trading style:

1. Time.
2. Experience.
3. Abilities.

Let’s consider each of them in detail.

Factor 1. Time. This is the first thing you should think about. How much time can you devote to trading in real life? 

It is important to understand that we do not speak here about trading 1-2 days or even 1-2 months. If you want trading to become your profession and main source of income, you will have to dedicate years and maybe even your whole life to it.

If you have some employment or do some business, most probably, you will not be able to find much time for trading. In such a case, the daily time-frame will fit you, since it requires only several minutes a day for analysis and trading.

If you have several free hours a day, you may think about intraday trading or scalping (what is scalping?).

You should also make an estimate of how much time you would like to dedicate to trading in the future and, taking it as a reference point, plan your development.

Factor 2. Experience. Your trading experience directly influences your decision on what style to select. The shorter the time-frame, the more difficult it will be.

For example, intraday trading or scalping is the task for an experienced trader, since the situation could change very fast and you should have real experience to make quick decisions frequently.

Factor 3. Abilities. Assess your physical and psychological abilities objectively. Execution of a big number of trades, which are connected with the risk of losing your capital, every day exerts pressure on the body and emotions.

You should increase your load in trading step by step, as you do it during physical training. Start from longer time-frames. After reaching a stable profit, you can start gradually reducing the time-frame and increasing a number of trades. By doing it, you will finally find your optimal trading style.

After you have started to understand what trading style you need, you can start to select an optimal indicator for your trading system.

Scalping envisages many short-term trades during a day. Indicators, which identify significant intraday levels, will help you to find such trades.

You can use these levels for finding bounces and breakouts. It is important in scalping to find market entry points with a short stop loss (what stop loss is) and take small movements in several ticks. The Dynamic Levels Channel indicator can help you a lot in this.

Working in the trading and analytical ATAS platform, you can load Snapshots, which is called Dynamic Levels Channel. The 6E futures chart with a loaded snapshot looks as follows:

The Dynamic Levels Channel indicator shows the following levels:

• POC – the maximum volume level for a set period,
• VAL and VAH – Value Area levels for a set period.

These dynamic levels could serve as resistance and support areas for the price and provide good market entry points. The Delta indicator, which is located in the bottom part of the chart, could help to filter out trades. You can find a good many entry points during a day on M1 time-frame with the use of this Snapshots.

Let’s consider a level breakout entry point example:

The chart shows that, initially, the price breaks the POC level (marked with rectangle 1) on the positive Delta. After that, a retest of this level takes place in point 2 on the positive Delta and this retest confirms the POC level breakout.

After that, a scalper can look for opportunities for entering into the market to execute a trade.

Let’s consider a level bounce example.

Number 1 in the chart shows how the first bounce from the POC level took place and number 2 shows the second bounce. You can start looking for a market buy entry point after the POC level withheld the price and was tested twice.

You should experimentally find optimum indicator parameters for every instrument, checking their efficiency on historical data.

Intraday trading is calmer compared to scalping. Less trades are executed, trading signals are not so frequent but the number of trades may increase.

During intraday trading, a trader may try to catch the impulse, which lasts several hours. You need longer time-frames for this, for example, M5-M15.

The Cluster Search and Big Trades indicators are good for intraday trading. These indicators show points of volume inflow into the market. You can understand who of the market participants – sellers or buyers – got into a trap based on the price reaction. These indicators can also show significant price levels for the market and stop loss activation points.

Let’s consider an example:

The screenshot shows the EUR/USD futures (6E) chart with M15 time-frame and Big Trades indicator.

The price movement dynamics was different during these 3 days, but the Big Trades indicator clearly showed points of big traded volume, which served as the price support and resistance levels. Monitoring this indicator can help a trader to find places of correction completion and beginning of new impulses.