If you take a close look at the daily charts on a forex pair, you will notice that’s it is a lot smother than the smaller timeframe charts, it’s quite a step above the 4 hr for a couple of reasons. For one thing it is a multiple of 6 more than the 4 hour chart, compared to even jumping from the 15m to the 1hr, which is 4 and from the 1 hr to the 4, well it’s obviously 4. The other big point is that all those quiet trading times during the day as well as the economic announcements volatility are absorbed into one candle, and this makes trading it infinitely easier.
The Key To Forex Profits Is The Daily Chart.
So many new traders focus on scalping, and this is such a big mistake, it’s one of the hardest forms of trading there is, you have to be able to be impartial to the market when there is so much perceived activity, even on the 1 hr charts, you can see massive big candles coming out of nowhere all the time. If you then look at the daily chart then unpredictable moves are very few and far between, most of the candles are very much the same and heading in the same direction. This leaves much less room for errors in your trading, it limits your trading to start with, which usually means limiting your losses.
Look Closer To The Forex Market To See Your Losses.
On average a common forex pair like the EURUSD will swing once a month, and these are the riskier times, it’s when the trend is changing and you don’t really know if it’s changing until it has. But if you look at the hourly chart you can see 3 swings a day, and that is disproportionally higher, these are the places where you lose your money in the market, as well as profitable opportunities there are many more opportunities to lose your money trying to work out whether a peak or trough is a swing or just a pause in a short term trend. Trading forex is all about reducing risk, you will never eliminate it but you can do a lot of things to reduce it to a level where you can comfortably make a consistent profit. Always look at the daily charts and remember it’s within those candles that you will lose money, take a longer term more pragmatic view to gain the edge that will see you make a profit.