Either you are just getting started at the Forex Market, or you have been trading for a while and losing quite a few trades along the way, this article can help you.
Many people think that spending all your time looking at the charts, analyzing them over and over in all its time frames (weekly, daily, 4h., 1h., 30min., 5min.) will result in an endless discovery of ideal setups to trade from. This kind of behavior will get you 'hooked' at every price movement, while fighting to find setups in increasingly shorter time frames, and even getting you to a point where you can't even go to sleep as you are thinking you might miss a few opportunities or, even worse, you just need to watch every single move, and every single pip change of every running trade… This modus operandi that keeps you at the computer is not what a trader needs to do, for it brings an enormous dose of emotion to the trading activity, therefore lowering your judgment skills. The first step you need to take in order to stop this is: FAVORING THE DAILY TIME FRAME TO PICK YOUR TRADES.
The fact that you are using the Daily time frame as your main focus, will immediately help avoiding Overtrading which, as implied, means that you are trading too much. Overtrading is very common amongst beginners and it is due to the need of emotion, the victory feeling and the fast reward that comes up while looking at the charts. Again, this kind of behavior, this craving for fast reward, creates brain stimulation similar to any other addiction, until it is no longer controllable. At some point, it is not important whether you are making money or not, all that matters is that there are one or more trades going, and letting in that fast money gaining potential brought by the emotional endorphins in your brain.
Obviously, there may be some Traders that can successfully do it (although only a nano percentage), but what this kind of Trading will bring you is a medium term accumulation of losers that will add up until your trading account no longer exists. Why? Because every time you are looking at the charts, you are doing it using a magnifying glass, thus watching just a small part of it and, by doing so, every time you enter a trade it will rapidly oscillate while providing excitement and removing clearness that would get you a proper Risk:Reward ratio that you should use in your Trading. At the end of the day, a single trade can make the difference between a positive and a negative result.
The Daily chart presents us with clear price direction, and a few entry signals such as: a Trend with Higher Highs and Higher lows or Lower Highs and Lower Lows; the kind of price action you should pay close attention to such as a Low / High Test; a Bounce off one of the eMA´s; eMA´s with a clear slope; a clear Horizontal Level of Resitance or Support; At the same time, on the same period, the 15min. chart would show an absolute irregular chaos, while 'hiding' the overall direction of the price, which (very likely) would result in a lot of entries disregarding an adequate R:R analysis, and a lot of "meant to fail" trading.
It is time to look at the Market like a Professional Trader, and to start looking at the charts without the obsession of quick gratification but with the clear goal of understanding the Market behavior in a longer term by watching the Daily time frame.
Here are some of the immediate advantages - The signals and movement perception are much clearer as you are watching a longer price direction in a medium/long term; - On the Daily chart, the bars only close at the End of the Day which will result in fewer trades and a smaller risk exposure; - It is easier to define your investment per trade, regarding the amount of risk and the desired goal , as you get more time to think about the decisions and to calculate your orders ; - Your Trading will be based on quality instead of quantity. It is preferable to take one trade in a week that reaches a 1:3 R:R ratio, than to spend the whole week stuck at the charts doing 20 trades, sometimes simultaneously (with higher exposure) and end with the same profit (or loss). - By paying attention at the Daily, you will only have to look at the Market at the End of the Day, therefore spending just 30 min. per day, from Monday to Thursday, which will free your time to take care of yourself and the ones you love.
We are not stating that there is no chance of success by trading smaller time frames as the Hourly, 30min., or 5min. charts. We just want to alert that, due to their higher volatility and speed, these are much harder to read (even if they don't seem to be, at first), therefore harder to manage in a profitable way. Remember, if trading is a strict self-discipline, motivational, and willpower test, the better you can develop those skills, the closer you will be to become a successful Trader.
And don't forget: 'Trading is a marathon, not a sprint.'
Happy Trading!
Copyright (c) 2013 TRADE IN - TRADE OUT
Many people think that spending all your time looking at the charts, analyzing them over and over in all its time frames (weekly, daily, 4h., 1h., 30min., 5min.) will result in an endless discovery of ideal setups to trade from. This kind of behavior will get you 'hooked' at every price movement, while fighting to find setups in increasingly shorter time frames, and even getting you to a point where you can't even go to sleep as you are thinking you might miss a few opportunities or, even worse, you just need to watch every single move, and every single pip change of every running trade… This modus operandi that keeps you at the computer is not what a trader needs to do, for it brings an enormous dose of emotion to the trading activity, therefore lowering your judgment skills. The first step you need to take in order to stop this is: FAVORING THE DAILY TIME FRAME TO PICK YOUR TRADES.
The fact that you are using the Daily time frame as your main focus, will immediately help avoiding Overtrading which, as implied, means that you are trading too much. Overtrading is very common amongst beginners and it is due to the need of emotion, the victory feeling and the fast reward that comes up while looking at the charts. Again, this kind of behavior, this craving for fast reward, creates brain stimulation similar to any other addiction, until it is no longer controllable. At some point, it is not important whether you are making money or not, all that matters is that there are one or more trades going, and letting in that fast money gaining potential brought by the emotional endorphins in your brain.
Obviously, there may be some Traders that can successfully do it (although only a nano percentage), but what this kind of Trading will bring you is a medium term accumulation of losers that will add up until your trading account no longer exists. Why? Because every time you are looking at the charts, you are doing it using a magnifying glass, thus watching just a small part of it and, by doing so, every time you enter a trade it will rapidly oscillate while providing excitement and removing clearness that would get you a proper Risk:Reward ratio that you should use in your Trading. At the end of the day, a single trade can make the difference between a positive and a negative result.
The Daily chart presents us with clear price direction, and a few entry signals such as: a Trend with Higher Highs and Higher lows or Lower Highs and Lower Lows; the kind of price action you should pay close attention to such as a Low / High Test; a Bounce off one of the eMA´s; eMA´s with a clear slope; a clear Horizontal Level of Resitance or Support; At the same time, on the same period, the 15min. chart would show an absolute irregular chaos, while 'hiding' the overall direction of the price, which (very likely) would result in a lot of entries disregarding an adequate R:R analysis, and a lot of "meant to fail" trading.
It is time to look at the Market like a Professional Trader, and to start looking at the charts without the obsession of quick gratification but with the clear goal of understanding the Market behavior in a longer term by watching the Daily time frame.
Here are some of the immediate advantages - The signals and movement perception are much clearer as you are watching a longer price direction in a medium/long term; - On the Daily chart, the bars only close at the End of the Day which will result in fewer trades and a smaller risk exposure; - It is easier to define your investment per trade, regarding the amount of risk and the desired goal , as you get more time to think about the decisions and to calculate your orders ; - Your Trading will be based on quality instead of quantity. It is preferable to take one trade in a week that reaches a 1:3 R:R ratio, than to spend the whole week stuck at the charts doing 20 trades, sometimes simultaneously (with higher exposure) and end with the same profit (or loss). - By paying attention at the Daily, you will only have to look at the Market at the End of the Day, therefore spending just 30 min. per day, from Monday to Thursday, which will free your time to take care of yourself and the ones you love.
We are not stating that there is no chance of success by trading smaller time frames as the Hourly, 30min., or 5min. charts. We just want to alert that, due to their higher volatility and speed, these are much harder to read (even if they don't seem to be, at first), therefore harder to manage in a profitable way. Remember, if trading is a strict self-discipline, motivational, and willpower test, the better you can develop those skills, the closer you will be to become a successful Trader.
And don't forget: 'Trading is a marathon, not a sprint.'
Happy Trading!
Copyright (c) 2013 TRADE IN - TRADE OUT
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