Published on August 18th, 2017 | by admin0
How to Do the Perfect Technical Analysis in the Higher Time Frame
The Forex market can be traded based on major three types of analysis. The first type of analysis is the technical analysis which helps the traders to find the key support and resistance level. Most of the retail traders use this analysis to execute their trade. The second type of analysis is the fundamental analysis which deals with all the fundamental issues of a certain country of the asset. This type of analysis is only used by the experienced professional and many traders in the United Kingdom often consider the fundamental factors as the most powerful tools to find the existing strength of the market trend. The third type of analysis is the sentiment analysis and this is something that we can never learn by reading books. We need to trade the market with strict discipline and over the period of time, we will develop this unique skill of sentiment analysis. Today we will discuss the technical analysis section and give you a clear idea to find the best quality trading signals.
Why we should use the higher time frame
If you trade with a professional broker like Saxo then you will notice that most of the traders are positional or long term traders. They simply ignore the lower time frame trading signals and focus on the higher time frame data. On the contrary, the novice traders get fascinated with the extreme potential of this Forex market and start trading the lower time frame. They simply think, the more they will trade the better profit they will have at the end of the day. But this is one biggest mistake that any novice traders can make. Trading is all about the high level of accuracy and you can never make a decent profit by executing random trades. Most importantly when you trade the lower time frame, you will have to deal with lots of false trading signals which is nearly impossible to filter out.
Use reliable candlestick pattern
The expert in the financial industry often trades the key support and resistance level using the reliable pattern of the Japanese candlestick. This type of trading is often known as price action trading strategy. Price action trading strategy is extremely reliable and profitable but you need to master it well by using a demo trading account in order to make profit consistently. Some novice traders often learn this trading system by using the demo account but still loses money in the real trading world. This because they switch to the lower time frame due to their lack of patience. Being a price action trader you need to have extreme patience and wait for the quality trade setup even for weeks. A single quality trade execution is capable of securing your whole month profit. So it’s all up to you whether you will get frustrated by trading the lower time frame or look for quality in higher time frame without any mental pressure.
Aim for high-risk reward trade
Trading is all about probability. After doing all the hard work you will still have to face the losing trade. But as long as you follow proper money management losing trade will not be a problem for you. There are some expert traders at Saxo who are making tons of money in every single month with 70 percent win ratio. So how do they do so? The answer lies in their trading strategy. All of them are long time frame traders and execute their trade with price action confirmation signal in the higher time frame. If they risk a single dollar they always make sure that they will win two dollars if the trade goes in favor of them.
Summary: Learning the perfect art of technical analysis is one of the hardest things in Forex trading. You need to develop a strong patience or else you will not be able to execute the quality trade. Always focus on the higher time frame price action confirmation signal and follow the market trend to reduce the associated risk in trading.