The Benefits of Trading Longer Time Frame Charts
In this video:
00:49 Trading less can be more
02:25 The major benefit of trading longer time frame charts
05:06 An email from a non-client asking about swap
I’m going to explain the main reasons why I much prefer taking longer time frame charts as a Forex trader. So let’s get into that right now.
Hi Forex traders it’s Andrew Mitchem here and I’m the owner of The Forex Trading Coach.
And in this video and podcast I’m going to explain to you the main reasons why I much prefer to trade the longer time frame charts.
Now there’s nothing wrong with scalping the market, there’s nothing wrong with taking trades off 5-minute charts or 15-minute charts but for me personally I think there’s a huge amount of benefits for taking longer time frame charts. As a longer time chart I’m talking anything from 1-hour chart, 4-hour chart, 6-hour chart, 12-hour chart, daily charts, weekly charts, etc. So anything that’s not scalping really.
The main reasons are:
Less Trade. Trading less can be more. Now it’s a commonly use “catch” phrase but in trading it really does apply. You see, you don’t need to be trading more and more often in order to make more money and people think that as a trader or as a full time trader or someone making their career out of trading you have to be settled what’s on the chart all the time; you don’t have to; it’s just a misconception. The important thing to do is to have something that works for you of course in terms of the time of day, the pairs, the type of trading style that you wish to use. But also you don't have to be doing that all of the time and the great thing is for the longer time frame charts is you can plan your day around your trading.
For instance I don’t really look at the 1-hour charts until later on in the European session which is my evening here in New Zealand. If you happen to live in the U.S. you might look at the U.S. session just on the hour charts. If I have other things or now I go to the longer time frame charts like looking at the 4-hour charts every 4 hours as and when I can. Anything longer than that well I’ve got a great indicator that allows me to create 6-hour charts, 12-hour charts and of course then you can look at the standard daily chart or weekly chart.
So what that means is if you trade on the completion of each bar or look to trade on the completion of each bar, if you’re trading let’s say a 4-hour charts for instance. You know that you have 4 hours in between one chart closing and maybe taking a trade if you see something and then, any potential new trade setup you got 4 hours to go and do whatever you want, get away from the computer whatever it might be.
So that’s the lifestyle and keeping away from the screen is one major benefit.
Higher Returns. The other of course is higher returns because generally on your longer time frame charts you generally get a higher reward to risk out of the trade. Spread becomes less of an issue and so you generally find that you’re able to achieve far greater returns from the longer time frame charts. I, very often achieve 2, 3 or 4 times my risk depending on what the charts setup is but generally on the longer time frame charts. It’s a lot harder to achieve those high returns on a 5-minute charts for instance. You’re going to catch a good run every so often but not only do you need to be there all the time. It’s a lot harder to gain a trade that’s let’s say got a 15 pip stop loss and a 60 pip profit and get that profit more often than not. It’s a lot harder to do that on a short time frame chart.
High Reliability. The other thing with the high time frame charts of course is the high reliability. There’s a lot more data in there, a lot more information within that one candle of let’s say a 4-hour chart or daily chart than there is on a 5-minute chart, so a lot more probability as a technical trader.
Less Stress. Also, if you trade the longer time frame charts, it takes away the influence of news and the fundamental news releases because you generally have big stop loss you can absorb any movements that should occur in a higher impact news announcement if you’re trading on a longer time frame charts so all that leads to of course less stress, less emotions involved. Put the trade on, walk away from your computer, you have your stop loss in place; you have your profit target in place. You know the very worse you can do. You know that if the trade works on your favor this is what I’m going to make out of the trade, so a lot of reliability there.