Last Updated on April 9, 2023 by Tabraiz
Once you start trading, in no time would you realize that most traders end up spending a major part of their short-lived trading careers over-assessing and over-analyzing short time frames in the market. Visit mex
What worsens this situation is that most of these traders are not able to get proper returns. As a result, they end up putting more effort in the same direction thereby proceeding at a much more unsustainable rate! Let’s talk about some useful ways in which you could upgrade your trading journey and keep your trades steady.
Trading on higher time frames
It is important to learn why trading on higher time frames is crucial. Without this, you’d join the ranks of several others who’re not trading wisely and are burning their accounts. It would keep you from being a chart-watching addict who’s always confused and worried with no life at all to being a chilled-out trader who knows what they’re doing.
Once you learn this, you’re going to feel bad for the trader still figuring out how to analyze low time frames. At least four times per hour, they start a wild chase for noise and signals. There would have been nothing wrong with this if the traders were successful. But the truth is, most traders reading too much into the intraday charts only end up burning themselves.
Daily chart trading is known as ‘Holy Grail’, are here are some reasons that show how multifaceted it actually is:
- Daily charts provide the most accurate and key market perspective.
- It provides less noise and has more true signals than intraday charts.
- You learn that ultimately patience and discipline are your best friends in the long term.
- Trading daily charts is not very time-consuming.
- Daily charts or end-of-day trading can be flexible so you can trade as per your schedule.
- Reduced chart watching and involvement imply that you would not be tempted to over-trade.
- Daily chart trading makes everything go slower so you can focus on one thing at a time and not lose focus.
- Trading infrequently on daily charts doesn’t imply that you’ll be able to take on more risk per trade, nor should you think that you wouldn’t be able to make more money on a monthly basis.
These are a few cases where trading higher time frames could entirely change your trading career.
Low-frequency trade
Not sure where traders get this notion from but trading is not a get-rich-quick scheme. It is an entirely wrong understanding of a market where you need to keep funding yourself to stay afloat!
But in all fairness, if you’d like to trade in this manner you’re welcome to but then you’d last for say just a week in the market. This is because mindless trading would translate to either used-up funds or a lack of energy.
As we mentioned above, when you trade higher time frames and trade not too often, the chances of overtrading and losing money also diminish. A major plus point of doing this is that you’ll find yourself in a position to take bigger risks.
This strategy is called capital preservation which all traders need to understand. The core idea is that you’d like to keep your funds protected so when the perfect trading opportunity arises, you’re not out of funds!
How can you make money trading low frequency?
Look at it this way: you open about 30 trades on a monthly basis and you have a certain risk per trade. You could take the same amount of risk but split the amount into three trades instead of 30 for better returns.
It is natural that a high-frequency trader would also be exposed to a higher loss percentage. You have to understand that the market does not have a large number of high-probability trade setups on a monthly basis. Your trades are not short of a gamble if you constantly trade lower time frames and higher frequency because you’re trading randomly, driven by false signals of the market.
If something, this one is all about taking calculated risks. You need to prepare yourself by assessing the risk associated and determine if it would be sensible to trade in the scenario. It would not be wise to trade on gut feelings because you’re putting your hard-earned money at stake. Such type of trading turns out to be hard on many people since it makes you go against your intuition. We’re often told that practice is what it takes to perfect something. The same applies to trading, if you’d like to get better results, you should be repeating your actions. However, repeating your actions without proper deliberation and analysis is not going to help. Study the market before you act!
Price action signals and confluence
Ultimately, the one change that may turn out to change your game entirely is to be able to look for higher-probability trade entries on the basis of price action trading signals from market levels. We simplify this below:
- Price Action – This refers to the rate over a certain amount of time. You should be able to determine the market’s directional bias to be able to trade well on the basis of recurring price patterns.
- Confluence – This is where two or more levels in the market meet to form a confluent point.
This technical approach can be easily understood by taking a look at some main market conditions and observe the kind of impact it has on the way you trade. When you figure out different ways to make use of price action along with naturally-occurring chart-based confluence, the picture becomes much clearer. Know more metatrader 4 trading platform
Leverage the combination of price action signals and confluence
Look for the pressing signs of price action patterns in the market that have emerged as a result of the market’s confluent point. These patterns would appear to be obvious signs to you only when you put the time and effort into understanding and practicing the ways to identify them. It is easy to learn how to work with confluent price action signals in tandem with higher time frames and a low-frequency approach.
Apart from this, if you want to know about Role Do Futures Play in FX Trading then please visit our Finance category
