Why trade the market using daily charts?
What's so special about daily charts? Why should you trade the market on daily charts? What's all the fuss about?
Daily charts mean that 1 new price action bar forms each day. It means that there is only 1 new piece on information each day for you to take into account. This makes your trading decisions less emotional as you aren't rushing a mile a minute to keep up with the data as it loads onto your screen. In short, it allows you to become a lazy trader. You have time to make your trading decisions, trading the market on the daily timeframe really does allow you to fit trading into your lifestyle.
Higher timeframes V Lower timeframes.
Higher timeframe charts really do give you the opportunity to fit trading into your lifestyle. It also means that broker transaction costs are a very small percentage of the trade. If you're stop loss is 100 pips and your spread (transaction cost) is 2 pips you have a 2% transaction charge. Whereas if you're trading a smaller timeframe chart, with say a 10 pip stop, but still a 2 pip spread, you have a 20% transaction charge. That's a huge difference and has a dramatic impact on your trading.
Lots of new traders start off their journey to trade the markets and begin on the smaller timeframes trying to make money as quickly as possible, fighting against market noise, and high impact news events, not to mention the significantly higher transaction charges. Ultimately it's not hard to see how they end up losing money, become disillusioned and stop trading. A simple solution to this is to focus on the 'less is more' approach and trade the markets on the higher timeframes like the daily charts and avoid the issues of high impact news events, higher transaction charges and market noise. Focussing on these higher timeframes is a much more sensible approach to trading the forex markets. It is also much easier to make money on these higher timeframes.
If you were given the option of A or B, and you knew that option A was easier, why wouldn't you choose it?
Trade the market in less than 30 minutes a day.
If you're going to trade the market in less than 20-30 minutes a day, you really need to have a structure and a routine that you stick to on a day to day basis. You also need to make sure that you follow your routine day in day out. This way your trading habits become instinctual and it becomes almost like riding a bike, something that you don't need to actually think about to do. You're subconsciously doing all the work without having to consciously think about doing it. Of course, this takes time to get this level, but this should be your goal when starting out.
Go from being unconsciously incompetent, to becoming consciously incompetent, so you're aware of the mistakes you're making. Then moving on to consciously competent where you are profitable and making money, then progressing onto unconsciously competent, where you are a consistently profitable trader, not having to focus all your energy on what you're doing.
It's this step by step process that you want to progress through as you learn to trade the markets.
How to trade the market using daily charts.
First of all, strictly ensure that you've got your charts set up correctly with price action being the most important thing on the screen.
Secondly, restrict yourself to 10 or so currency pairs. Don't look at 30 different currency pairs every day, as it'll just be too much work.
Thirdly, ensure that you have your charts on the daily timeframe.
Now you can focus on the daily charts and trade the markets with strong price action signals and fit trading into your lifestyle.
Check out our other articles on our blog Trader Talk
No comments:
Post a Comment