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To work on Forex traders use eight basic timeframes: from minute to month. The choice of the timeframe for analyzing prices and making transactions has a great impact on trading results. That is why you should take it in right earnest. Unfortunately, most newcomers prefer short timeframes and try to use pips or even scalp strategies that often lead to dire consequences. According to the statistical data newcomers who start working on foreign exchange market and use daily Forex charts succeed in most cases and undoubtedly more often than their colleagues having chosen short-term trading do.
The major problem of short timeframe strategies is that while using them a trader has a very short period of time to understand the character of the trading tool and to analyze the influence of economic news. The trader should have a certain experience at the market as he should take decisions and fulfil certain actions very quickly.
In order to improve the quality of your trading activity and to correctly choose timeframes it is necessary to consider the reasons why short timeframes are so attractive for traders and why they seldom choose daily timeframes to analyze and to place the orders.
First of all, it is connected with longing for activity. It means that newcomers want to observe the growth of the profit, to make a lot of transactions and to feel their connection to financial flows. It is good on them. However, in practice constant monitoring exhausts and causes fatigue when the trader stops thinking efficiently and starts making rash actions led by his emotions among which are mainly fear and greed for gain. Of course it cannot have positive effect on trading results. As a result, the trader suffers from losses and closes the position with the smallest possible profit being afraid of losing any income, even the smallest one.
If one also mentions that trading signals in short timeframes are influenced by market noise and are often false it is becoming evident that short timeframes are not for the newcomers!
The major disadvantage of daily timeframes as seen by the newcoming traders is a small quantity of signals. Newcomers usually want to have the cake and eat it. They expect that transactions will be made every day that is why they don’t consider Forex’s daily and more senior timeframes. Another and more significant disadvantage of trading on D1 is that the stop-loss size is usually limited within 100 points and can sometimes reach 200 points. It is quite a lot for small deposits that is why one should use a minimal lot. Newcomers consider that to be a disadvantage however it is compensated by the big size of take-profit that holds the two - to - one correlation according to the classical rules of middle and long timeframe money management.
Now we should look at the advantages more in detail. So, daily Forex chart allows:
Trader who compares advantages of the short-term and long-term trading always chooses the last one. However you should not think that daily Forex chart is a panacea. Trading at the foreign exchange markets is a high-risky activity so in order to succeed you should accurately evaluate the risks comparing them to your deposit.
Thus, your wish to succeed must not blind your brain. While using the D1 you should thoroughly observe the rules of money management as only disciplined trader can expect to succeed.
While working on the daily timeframes you should not neglect levels. It is a very important moment as the levels look indistinct on the smaller timeframes. However they often play a very significant role for the D1 as they are the very point where formations of trend reversal or continuation work the best. The trader ignoring the levels cannot expect much benefit from the daily timeframes.
Besides, while working with trend strategies it is especially important that you take into account cyclic behavior of the price and enter strictly on the pullback from the trend. Otherwise, correction movement development at the wrong entry point can get on your nerves with the big drawdown which can sometimes be unbearable for your deposit without additional money input.
If you understand all the advantages the daily Forex charts can provide you can easily become a stable earning trader. However, the D1 is not comfortable for the newcomers from the psychological point of view. Nevertheless the advantages of the middle-term trading are evident and should outbalance the enthusiasm of direct participating in trading typical of short timeframes. The reason lies in the threat to draw deposit without settling on Forex. That is why the trader should choose timeframes consciously and use their specific features on his own account.