Choosing Timeframes in Forex Analysis
If you have started trading in the forex markets, you are probably looking for new ways to enhance your results and to push the odds into your favor. Forex traders that are looking to develop a winning trading strategy will need to keep a few factors in mind. Issues like fundamental analysis and overall risk tolerance should be mentioned here but when we are looking at individual trading positions one element that is often missed is the time frame under which the trade is designed to operate.
This is important because it will allow you to better understand when a specific trade should be closed out. Of course, the close of the trade is what determines whether the trade results in a profit or a loss. It is also what determines the value associated with those profits and losses. So it is somewhat surprising that the trading time frame itself is so often forgotten. Here we will look at some of the reasons for why these types of mistakes should be avoided.
Gaining Broader Perspective
When we are able to use a charting time frame as part of our trading analysis, we are able to gain a broader perspective on the market. This is why reputable broker software is needed, so that this type of analysis can be accomplished successfully. The forex trading software that is provided free by FiboGroup is one of the best examples here, as there is client access available for both MetaTrader 4 and MetaTrader 5.
Once your technical analysis has been successfully completed, you will need to balance your risk to reward ratios in ways that meet your trading timeline. Shorter term trades tend to have wider stop losses than longer term trades. This can help you to keep your risk assessments to a minimum while allowing your trade enough “breathing room” to avoid being stopped out prematurely.
Without proper time frame analysis, you trade has a much lower chance of success and in generating profits for your forex trading account. This is a mostly avoidable mistake, however, because we need only to use one or two charting timeframes in order to conduct the proper analysis and to structure our trades in the appropriate manner. Keep these factors in mind when you are actively trading in the forex markets.