Forex how to trade daily charts
What the 4HR trader may not realize is that this is not a pullback of the 4HR trend, but rather a continuation of the Weekly trend. So to the 4HR trader, this looks like an unexpected major reversal in the market, but to a long term trader, it is an obvious and expected continuation of market flow, looking like this on the Weekly view:. Again, so many people looking at 4HR charts think they are long term traders, but they are ignoring the real long term time frames—and that can get you into big trouble just like in this real life example… Those two bearish weekly bars you see would crush someone trying to take long positions on the 4 Hour chart, yet they are just part of the flow on the Weekly view.
Now, I am not saying that you cannot trade profitably on the 4HR charts; I am saying that it is very difficult to make consistently profitable trades when you do not have a good perspective of the markets longer term movement—especially when trying to trade an intermediate time frame like the 1 or 4 hour time frames.
One major note about this strategy is that you must be disciplined if you want to succeed. One of the biggest mistakes that unprofitable traders make is over-trading and over-managing their trades. As human beings, we have the desire for action and involvement which tends to cause us to always want to have a trade open or always want to manipulate the trades we do have open, and I can promise you that this will only lead to less and less profitability.
Looks for trends on these longer term charts that have good momentum in the respected direction. Identify the direction of the trend bear or bull and make a note to only look for entries in the direction of that trend for instance, if it is a bullish trend, look for buys.
In other words, the criteria has lined up for you to make a trade, now all you need is the signal to confirm your forecast. For this strategy, the signal is a momentum daily bar in the direction of our long term trend.
An ideal daily signal candle will have a tail that has tested pierced through the Fib level, but then reversed back into the direction of the trend:. Place your stop and target. Trading is all about Math—a good strategy has winners and losers, but at the end of the year, the winners out-weigh the loser. Part of the reason USD traders analyze and place trades between the NY close and Asian open is the influence of false movements. On many occasions, price will pull back during the Asian session and then rebound during New York.
A trader should be aware of this to prevent getting knocked out of trades with tight stops or face premature triggering of their orders. Scalping is often advertised as a great means to spend just a few minutes involved with the markets to build profit. The reality is a bit different. Yes, the trades are much shorter than multi-day trades, however the participant needs to pay attention and analyze the charts for longer chunks of time to find multiple, perfect set ups for their strategy.
That often requires a greater degree of focus and attention than long-term trading strategies. A trader who is new or hasn't quite made it into profitability should keep in mind that Daily charts are the best time frame to learn on. They aren't too long but they are long enough that they don't suffer from a lot of noise like lower time frame charts.
Signals tend to have more strength behind them because they are aggregating a larger body of information. The 4 hour chart also features strong signals but has a bit more noise to it than the Daily.
Trading can be a complicated beast depending on what kind of strategy you decide to embrace. Developing your own strategy when you don't have an in-depth knowledge of the markets and indicators is extremely difficult.
Many traders make the mistake of trying to incorporate too many indicators into their strategy thus they either miss opportunities because of conflicting information or execute on circumstances that don't relate due to how their indicators work in tandem. A trading strategy is often more than a collection of indicators; it tends to be a reflection of the creator and their trading philosophy. A calculated, methodical trader will probably favor a calculating, methodical strategy.
Traders that are easily excitable are not likely to find success scalping as it is high-stress and requires immediate decision making to be profitable. The trader should strive to find the strategy that meshes best with their personality and trading philosophy. Determining Stop Loss placement is normally part of a well-developed strategy. The point that traders often neglect is when to exit from a profitable trade to ensure they are securing and building onto their profit.
The right exit criteria will often depend on the trader's personal risk appetite and goals. Exits will have to be shorter for a scalping strategy than for a daily time frame. A scalper may go for a 1: There are some long-term strategies that aim even higher than that but place very few trades. They may aim for 1: The run up to the week or so before Christmas until after the New Year is typically a very low volatility time. Signals may regularly appear but go absolutely nowhere because there is simply not enough participation in the forex markets during the holidays.
Scalpers may be able to ply their strategy and eke out a profit but long-term traders will likely be better off hanging up their accounts for a couple of weeks and taking a break until things pick back up. Experienced traders will read this and probably think "no kidding"; but this point isn't hammered on nearly enough in material meant for new traders. This is an important bit of information for placing effective Stop Losses.
If you're likely to hit Resistance at 1. Sometimes you can see momentum slowing and traders piling out several pips before it actually reaches the technical zone.
A trader can make an estimation of how much counter-trading is happening on the lower time frame charts. Is there clear, dominant movement toward the level? Or is there a lot of pull back as traders close out their positions? If you are looking to set a Take Profit; then you should aim several pips before you will hit the zone. Many traders neglect keeping an informative Trading Journal. There are many easy to use spreadsheets available out there to keep track of the numbers.
The trader should not neglect to take a screenshot of all relevant charts used for decision making, entry, and exit of the trade. Some spreadsheets or trading journal software packages allow easy linking between a trade and attached graphics. Other traders may find it easier to simply print off the charts and keep a three ring binder journal.
Almost every trader has an "I blew out my account" story to tell. This happens a lot when a trader is confident with a successful Demo account, moves Live, and proceeds to lose their balance. Why does this happen? It's easy to make decisions when you have play money on the line. It's an entirely different story when it's your own money. If you are ready to make the transition to live; do yourself a favor and open a micro account with a couple hundred dollars first to get used to the difference in conditions.
Read section 8 of this post to see what I did when I first started out on a micro account. There are numerous economic calendars available on the internet that will have a breakdown of important events that may impact forex in the coming days.
It's not a good idea to enter the markets ahead of one of these events as the market response can be very unpredictable. A quick look at a calendar will note that there are regular speeches from government leaders or financial officials. These speeches are almost always tagged as "Low Volatility" and normally are. However, it is not uncommon for the relevant currency to make a drastic run in response to something they say or allude to in their speech.
Always treat these events as "High Volatility" instead. Not all forex traders keep an eye on multiple currency pairs.