Trading The Daily Charts
(Forex FX 4X, Trading Articles)
Many traders have aspirations to trade the markets on a full time basis, but the day-to-day reality of this may not be aligned with their initial expectations. Lets face it, everybody wants to get rich quickly but intra-day trading often comes with the following negative associations:
Trading using short term charts often has the individual taking too many positions and overtrading. This impacts the bottom-line as the cost of conducting business is higher, through broker commissions which adversely impacts profits (at best).
Many traders do not have the relevant processes mastered before they move down to the intraday charts. The markets are not a forgiving place to learn in and any mistakes of this nature could cost dearly.
Market ‘noise’ is often associated with intra-day trading as the tighter the stop loss the more chance of a minor news release causing a random movement, which sometimes results in a losing trade. Extreme volatility following the release of fundamental data can easily whipsaw traders out of their existing positions.
Keeping control of emotions when experiencing losing trades. This is a big one... It’s one thing to take a loser and know that the next chance you have to trade is a day later, which is the case with many EOD (end of day) strategies. However, the intra-day trader may “stop and reverse” after each losing trade, this could happen within minutes when trading lower time frame charts with a catastrophic effect to the account balance a real threat if the traders experiences “tilt”.
The threat is always there that the trader will move into a “revenge trade” state of mind and adopt a less than optimal strategy in an attempt to win back previous losses, especially for those with a disposition towards taking losers badly. Compare this with the trader who has time to cool down overnight if the EOD strategy brings a losing trade and maybe go for a run or meditate to bring about a change of “state”.
Intra Day Trading Works For Some – But Not All
Now don’t get me wrong, skilled traders, who truly have a proven intra-day trading strategy may see the longer timeframe charts as limiting their execution opportunities. But novice traders, along with more experienced traders who struggle to deal with the fast pace of lower timeframe trading, or anyone who doesn’t want to sit in front of a computer all day, may benefit from trading the daily charts on an EOD basis with the associated slower pace of trading.
Trades Often Take Longer To Develop
There are of course negative factors (depending on your perspective) associated with daily timeframe trading. Trades executed from the the daily timeframe charts can take time to develop and reach the profit target (or possibly the stop loss…). It may take hours, days, weeks or longer based on the trading strategy employed. The positive side to this is that trading higher timeframe charts also helps us develop patience and discipline, two qualities which serve the trader well. There is also sometimes an inherent cost associated with rollover of positions, so the trader should try to minimise these transaction fees (rollover is the term for the interest paid/earned when holding a position overnight).
Striking The Right Balance
Potentially, the main benefit of trading longer timeframe charts is the fact that traders can fit trading around their existing schedule and keep earning a steady wage while learning to trade. The added pressure of trading to pay the bills is too much for many and often counter-productive. When trading the daily charts you can keep your day job, successful traders then have an opportunity to create multiple income streams. These traders have the potential to build an account trading the markets, but are likewise able to spend quality time away from the computer, doing the things they enjoy in life.
Some will say that if they can’t monitor the markets all day, then they are unable to trade. Ask yourself if this is why you originally became interested in the markets, and if this is conducive to you performing at you best. Are you looking for instant stimulation or a profitable approach to trading the markets…Consider also that the daily timeframe charts are potentially viewed by the majority of market participants. These traders will often gauge sentiment, price action and gain a directional bias on the daily charts.
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