Finding profit in Forex. Where were the profits hiding? I think they were hiding somewhere between the 5 minute bar chart and the daily chart. One of the Forex topics that I often talk about is why new traders should only trade higher timeframes. I consider great time from an 8-hour chart or longer. Personally, I mostly trade on daily histograms because I like to get a general idea of the currency market without the noise of small time frames. I find it makes my decision making process easier.
How about noise? I mentioned that noise is the reason why I don’t trade lower timeframes. To me, noise is the constant waves and ripples that cause the price of a currency pair to move up and down. Of course, this can give you a lot of opportunities to make trades, but I have found that the more trades people make on these smaller timeframes, the more money they lose. Most retail traders simply don’t know how to pick enough profitable trades to make them profitable, and they also don’t have a system in place to keep them from losing trades.
The truth is why I love trading on the daily chart so much. Yes, it’s true that there is less noise on the daily chart, but the best thing is that you don’t have to check it as often. Day bar trading does not require you to sit in front of your computer all day watching the Forex market go up and down. Now that I only trade on the daily chart, I look at every currency pair I trade once a day. I open my trades and I’m done. I have an app that allows me to track the progress of my trades and I rarely even check it.
I love the freedom this type of trading gives me. The funny thing is that you can do these arched day trading games on a daily chart. For example, it’s not weird that I enter a trade chasing 50 pips or more when I see an engulfing candlestick pattern on my Forex chart. I also occasionally trade a trend that looks like it will continue with a day trading approach. By day trading, I mean that I will close this position or try to reach my target within 24 hours.
So where is the profit? They seem to hide on larger timeframes like the daily histogram. As you can see, my method is to simplify things. I want to make as few trades as possible and I want to set and forget my trades. Once I open a trade, I let it run its course. I don’t change or add it. I don’t make any decisions when I press buy or sell.