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Forex Trading: Time Frames as Part of Your Trading Plan

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Forex Trading:  Time Frames as Part of Your Trading Plan

In any business, a clear approach needs to be created,understood, and then implemented on a regular basis.  The forex markets are no different.  Getting into these markets without a trading plan is no different than driving at night with no headlights.   Forex traders that do not have a clearly defined plan might see a strain of wins and begin to think that it is superior skill that is guiding the outcome.  But the fact is that nothing could be further from the truth. 

               

“It is a common saying that ‘even a stopped clock is right twice a day,’” said said Ann Gorenkova, currency analyst at NordFX Company, “and this can be applied to forex trading as well.”  But probabilities show that haphazard approaches to forex trading rarely (if ever) hold up over the long term.  Because of this, you must approach your trading plan the way a priest would approach the Bible, because this is going to be the key determinant of whether or not you are able to succeed in this business over the longer term. 

Focus on the Main Elements of Your Strategy, Not Simply in Gain

Top traders are always looking to turn market gains of the market into their favor.  If this is your main focus, you should take your money out of your broker accounts right now and head off to Las Vegas.  At least there, you will get free drinks and maybe a hotel room.  Forex trading has nothing to do with this type of activity, so if you are not prepared to mentally align yourself with these facts, it is highly unlikely that you will be trading for very long.             

Instead, forex traders must look for trading signals that meet their position criteria.  If a trading edge is not present (if the probabilities are not in your favor) you must be cognizant enough to know that these conditions are in place.   This is the only way to properly manage risk, which is easily as much a part of trading as managing profits. 

Consider Using an Alternate Time Frame

One of the most important elements of forex trading involves defining time frames.  Struggling traders that are finding themselves in disadvantageous positions should consider using their chart analysis strategies on time frames that might not otherwise be familiar.  If your charting strategies are generally focused on 5 minute charts, why not consider changing your focus to an hourly or daily strategy?  Technical analysis patterns follow the same logic no matter which time frame is being used.  But it is entirely possible that extending your time frame will keep you from over trading and entering into positions that should have been avoided. 

In addition to this, using different time frames can give you a different perspective on the ways that markets regularly act and behave.  Lower term time frames can be less consistent and heavily volatile, and it is entirely possible that your trading strategy is not well suited to this type of environment.  Changing your time perspective can help with this and possibly give you a trading environment that is better suited for the strengths of your trading strategy. 

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Forex Markets

 

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