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Take a step back to see the big picture.
By Tom Long | March 24, 2008
One issue I see with many new traders is that they use the shortest time frame charts to make their trading decisions. It is typical to see new traders use a 1-minute or 5-minute chart because they think that their risk is lower. Since they risk less on each trade, they must be better off. The problem is that these trades found on these charts usually result in more risk as you can have many losing trades in a row because of the volatility on those charts. In our FX Power Courses we recommend trading off of the hourly or 4-hour chart in the direction of the trend as seen on the daily chart. This way you are trading with the momentum of the market and are able to be in on some of the bigger moves that these markets are known for. Those big spikes on the 5-minute chart are easily explained on the longer-term charts as they usually are within a bigger move. So start with the daily chart to identify the direction of the trend and then move down to the hourly or 4-hour chart to find your trade. If the trend is up, then only look for buys and if the trend is down, then only look for sells. This does keep your risk acceptable and the potential profit big enough to cover those losing trades.
noneTopics: Don't Trade Like This |