It is only natural to make mistakes in our lives. However, it is also important that we identify those mistakes and try to rectify them. Because if we don’t solve our problems it will get bigger with time and become e a huge pain for us. For example, in trading, many traders lose their investment for not using the most suitable time frame. Well, it is fine as long as you are willing to learn and get some good teaching out of those mistakes.
At times, the UK traders don’t trade on higher time frames. They feel like the opportunity they are looking for is very poor in higher time frames compared to lower time frames. However, when you are first starting as a trader, you should keep in mind that you can’t gather all the experience of a long-term player. You might not have the skills to deal with the risks that a pro trader has. So, when you are looking high up at the lower time frames, you may forget about the risks that come with this time frame. These risks might be more detrimental to you than having marginal profits in higher time frames.
Let’s say, you faced a loss of 10% on $100 in lower time frames whereas you made a profit of 1% on $100 in higher time frames. So, which one is better? Definitely, the second one. So, even though your incoming profit may be a lot lower than your speculated profit in lower time frames, it is safer to trade for constant profits than to lose a big amount. Moreover, in higher time frames, a trader gets a significant amount of time to think about their options and come up with the best decision.
Higher time frames
After reading until now, many may wonder about what a higher time frame is. Well, just like its name, it is the time frame where the price value changes in a long interval of time. For example, in weekly time frames, price changes within a week’s interval. It is mainly used in price charts to show the financial condition of a good. Like, in the candlestick chart, one single candle denotes the price changes within one single week. To learn the higher time frame trading method, you can also use a demo account. Try it out here and you will be happy to see the features of Saxo.
In a candlestick chart, the opening and closing price, as well as the highs and lows, are all indicated in a particular time. So using a weekly time chart in the candlestick chart means, the opening price will be marked at the beginning of a week while the closing price will be marked at the end of the week. The highs and lows will be counted depending on how much the price has moved the highest or the lowest within that particular week.
Now, one of the biggest traits of financial market that you will not find in higher time frames is a detailed price movement of commodities. But, as a day trader or swing trader, you don’t need to trade based on a detailed price movement. Looking at the wider, long term picture of the price movement is enough for you to make your trade.
Higher time frames like weekly time frames are mostly useful to determine a trend as it shows a more stable and less fluctuating price movement. If you are looking for any range in any of the major currency pairs then weekly time frames should be your first option to make calls.
However, you should also keep in mind that trading only on weekly time frames is not a good idea. Since this time frame is too long and slow, you may encounter many problems like forced to close a trade on bad terms due time limit imposed by the brokers. So, it is the wisest to use a short-term time frame alongside a long term frame to make better market analysis and better trading opportunities.