Sunday, February 25, 2018

Forex Trading: Advantages of Larger Time Frame

May 31, 2010 by  
Filed under Forex Strategy

When I started trading, I was looking the forex chart at the time frame of 15 mins. After a few days. , I went to 5 mins chart, then back to 15 mins chart… My strategy then was earn 20 pips daily and trading using the support and resistance lines. I was thinking, “hey! Earning 20 pips must be easy man! Everyday the market move more than 20 pips, so it shouldn’t be a problem hitting my take profit level!”

I have forgotten one thing also. It may be extremely easy to hit my take profit level, but it is also extremely easy to hit my stop loss level too.

After hitting a series of loss trades, although it is just a demo account. I can still feel the pinch… I want to be financially free, not financially embarrassed. And from the looks of it, I am going to be financially retarded… So when a student has problems, where do go to? To his mentor. I am very luckily have Huang Yong as a mentor as a just a sms, we arranged a time to meet up and discuss my series of loss trades ‘flu’.

He changed my perspective on the time frame chart.

He pointed out what isn’t optimal with my initial strategy:

  • I am trying to be a ‘day trader’ but I don’t have the time to do it, thanks to my job.
  • Small time frame charts needs a lot of attention and I have other commitment to fulfill. (For example, this blog)

However, during the discussion, I voiced out that these factors doesn’t suppose to affect my trading, if the strategy or system suppose to work.

He shook his head and explaining further, “These System and strategy may work for others, because they have the time, resources, and most importantly the right state of mind to use it. You need to use other strategies that gives you a different benefit and more leeway due to your time and commitment needs.”

Seriously, I don’t fully understand what he means. Even up to now… However, I am sure of one thing, doing the same time and expecting the different is insane. So I ‘pretend’ I understand (hope he never read this part) and go along the flow.

“Now, just change the time frame to 4Hr chart and do the same”

“Huh? So big ar? Why?”

“Aiyo~~ Why you ask so much? Try first la, I ask you to do things got reason one la. You try first, experience first than you understand more.”

Right now, although I don’t really the way he is going, but I have to trust him. He does has a point, experience is irreplaceable.

After a week, we met up again.

“So how? What you think of using a larger time frame chat.”

Then I told him what I found out, he nodding his head in agreement.

Bigger time frames’ advantages are they let you see the market in a boarder view, showing reliable trend lines. I started as small time frame chart like 15 mins and 1 hour, aiming to earn money DAILY, which means I been playing the clicking game.

“That’s right, however you probably didn’t notice some other advantages you have already leverage on but didn’t notice.” Huang Yong trying to supplemented more to my learning.

“Larger time frame charts also can act as a filter. There is so much movement in the forex market, which much of them does not give any meaning at all. Those movement are what I called ‘noise’. However, monthly chart has less noise than a weekly chart, so is a weekly chart has lesser noise than a daily chart, etc etc.”

“Making your judgment based on noise is dangerous. So, larger time frame shows what are the major trends, right?” I am trying to figure out where is this going to take me to.

“Of course la. Smart la you.”

He carried on and pin out that no matter what trading strategy is used, the entry point in the currency market using the higher time frame is more dependable than smaller time frame. One hour time frame and below is usually very unreliable and it is extremely not recommended. Experience, again, play a role. Because we need to know what works for us or not. With experience, we can develop a trading plan with more particular entry and take profit levels.

“It isn’t that to say small time frame chart does not earn money. There are a lot of traders making a lot of money using small time frame chart strategies. It is just that taking that path is simply more intense and does not really allow any traders that still need a full time job to maximize those strategies’ fullest potential.

“Last but not least,” Huang Yong finalizing the lesson, “since you just start up as a trader, you should concern yourselves with large time frames like 4 hourly and higher charts. Once you profit often from these charts in the forex market, you really can achieve financial independence. Just remember that small time fram charts’ signal isn’t really reliable.”

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3 Responses to “Forex Trading: Advantages of Larger Time Frame”
  1. Sanjay says:

    Yes, you’ve got yourself a very good mentor there, mate. I have been trading for 7 years now, and i trade off the Daily Charts only. In fact, my strategies are too simple even to mention, and it is embarrasing when i meet up with High tech Savvy traders who talk economics and PPI Indexes……..

    But they are VERY powerful strategies. I do get lossess, please don’t get me wrong. My ratio is 7:10. Money management is crucial in any finacial instrument you are in. I am sure all of you know that by now.

    I currently live in Singapore, but will be going back to my house in Tyneside, England. No, i’m not a Magpie! haha!

    So far, i have made only close to a few hundred thousand pounds, not a million yet. But enough to keep me and my large family going. La. That is how you say it here yes? haha…

    Ok Happy Trading everyone!

    • Zac Ng says:

      Hi Sanjay, I would like to know what your starting capital is to get the rewards you are getting. Care to share your money management approach, leverage etc? Appreciate it much!

  2. admin says:

    Good to see real humans talking in my blog. lol
    the simpler the strategy is, the better. that way, mistakes can be cut down.

    Happy Trading Sanjay!

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