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Don’t jump around different timeframes
Written by: PaxForex analytics dept - Monday, 22 June 2015 0 comments
Many new forex traders often make the mistake to jump around from timeframe to timeframe as they are looking for profitable trades. This is a very big mistake and can lead to unnecessary losses. Discipline and patience are key components of a successful forex trader and so is knowing that a strategy is built on one timeframe. Some traders create different trading strategies for different timeframes which is perfectly fine.
The primary reason why jumping around from timeframe to timeframe will often result in losses is that a currency pair can show a bullish chart pattern and technical indicators will give bullish trading signals on one timeframe, but the total opposite on a different timeframe. Therefore forex traders need to pick one timeframe as the foundation of their strategy and create it on this timeframe only. All trading decisions should be based on the timeframe the strategy was created on.
Forex traders may want to set all their trading charts to the timeframe on which the trading strategy was created. This can speed up the time to browse through all
currency pairs of interest and analyze them accordingly. We live in the information age where news travel fast and financial markets are very dynamic. This means that any way a forex trader can reduce the time required to analyze a trade and execute it should be taken advantage of.
Once a forex trade has been selected on the right timeframe a smaller timeframe can be used in order to have the proper entry level. This is a very important step to take. Smaller timeframes move much faster than larger timeframes and using one, usually the larger one, for analytical purposes and the other one, usually the short one, for entry and exit purposes. Successful forex traders often use two timeframes in tandem.
For example you take a look at the EURUSD at the D1 timeframe and apply your analysis on it. You could now move down to the H1 for example which may give you a different signal. You can ignore this divergence which is absolutely normal. In case you have a buy signal on the EURUSD in the D1 timeframe, then wait for the H1 timeframe to also produce a buy signal before you enter your trade. The D1/H1 is just one example and forex traders can combine them as they see fit.