Trading Higher Time Frames Drastically Increases Trading Success
Forex
traders are often tempted by the lure of lower time frame charts; they
think they are somehow getting closer to the “real” action in the market
and that they will find more trading opportunities on these fast moving
charts. The reality of the situation is that the lower in time frame you go the less accurate any trade setup becomes,
therefore, by trading lower time frame charts all you are doing is
lowering the probability that any trade you take will be a winner by
adding more variables to the equation of forex trading. Anyone who has
been following my articles knows that I often talk about how dangerous
it is to over-complicate your trading and that the keys to forex success are having the patience to wait for the best trade setup and thoroughly understanding forex risk to reward
scenarios. Therefore, this article will discuss the advantages of
trading the higher time frame charts and how they can help you become a
patient and profitable trader• Higher time frames act as filters of market noise
First off, by “higher time frames”, we are referring to the 4 hour time frame and above, any chart less than a 4 hour chart is considered a “lower time frame”, 1 hour charts can be useful to more experienced traders for refining their entry or exit, but they are still considered a lower time frame and should be avoided by beginning traders.
One of the biggest advantages of trading the higher time frame charts is that they act like filters of price movement. The forex market has such high daily trading volume, that the lower time frame charts contain what market technicians refer to as “noise”. The noise of the lower time frames is basically just price movement that is so erratic that it cannot be reliably used to make trading decisions; however, many traders get tempted by this erratic price movement because the human mind naturally tries to find patterns in nature and in the financial markets.
When you trade the higher time frames you get a clearer picture of what is really happening in the market because most of the erratic market noise of the lower time frames is eliminated. For example, if you see what looks like a large up move on a 30 minute chart, it might just be the beginning of a daily bearish pin bar, but if you were trading the 30 minute chart you might see this big move and then find a reason to jump on board only to have it come crashing down against you into the daily close. There are so many opportunities on the 4 hour and daily charts that concentrating your mental energy on lower time frames is simply an inefficient and ineffective use of time. Traders need to understand that the market will still be there tomorrow and the next day and for the rest of their lives, so missing out on a few good opportunities per week on the lower time frames is more than worth the sacrifice when you consider there will always be more accurate opportunities on the higher time frames.
• Trading higher time frames is part of the K.I.S.S. forex trading strategy
Simplicity is one of the keys to forex trading success, it is very important to keep your technical trading strategy simple in design and implementation, because over-complicating your trading is a sure-fire way to begin committing emotional trading mistakes. When traders begin trading on lower time frame charts they start over-complicating the trading process by trying to read the inherent noise that is a part of these fast moving charts, this inevitably causes them to over-trade which is one of the main causes of failure in the forex market. Remember, keep it simple stupid.
Higher time frame charts provide a much more useful and accurate depiction of price movement, this will enable you to be more confident in your trading decisions which will begin reinforcing a series of positive forex trading habits. Many traders struggle for years trying to trade lower time frame charts, eventually they either give up all together because they have lost too much money to bear, or they figure out that trading the higher time frames is a necessary component to consistent trading success. By understanding this fact now, hopefully before you have lost much money in the market, you can begin to focus your time and energy on the higher time frames and avoid the struggle and frustration that comes with trying to analyze the noise of lower time frame forex charts.
• Patience is key, higher time frames foster patience
It is no big surprise that traders who take a longer-term view of the market and trade higher time frames make more money, on average, than day traders. The reason why is because higher time frame traders naturally take far fewer trades than day traders or traders who mainly trade lower time frame charts. One of the most lucrative trading traits you can possess is patience; it is often overlooked by traders because so many of them erroneously believe that more is better in every aspect as it relates to forex trading. You will naturally take fewer trades when you stick to the higher time frames, assuming that you know what to look for and have the patience to wait for the trade setup you are looking for. Learn to think about this time in-between trades as a period of self-discipline and self-mastery, the very fact that you are not trading when there are no obvious signals means that you are not losing money, and not losing money is the same as making money when you consider the fact that you would be trying to make back what you lost, but since you didn’t lose any money you have nothing to try and make back.
By focusing on the higher time frames you also work to influence and develop the proper trading mindset. By trading less frequently you will naturally become a more objective trader because you will not be over-analyzing the market, trying to manifest trading signals on every time frame. Being an objective trader is different from being a fearful trader, objective traders know what they are looking for and when they see it they pounce on it like a tiger stalking its prey, fearful traders cannot act even when they see what they are looking for in the market. So, make sure you do not become a fearful trader, master your trading strategy first, this way you know what to look for, then wait patiently as the market plays out and the amateurs lose money on the lower time frames, when you spot your higher time frame trade setup you execute the trade with confidence and serenity.
• Price action signals are stronger on higher time frames
Finally, perhaps the most important reason you should stick to the higher time frames when trading the forex market is because they add weight to your trading strategy. As a price action trader, I know that a daily pin bar setup is much stronger than a 30 minute pin bar setup; therefore, because I have this knowledge I simply prefer to wait patiently for the perfect daily pin bar setup rather than frazzle my nerves and lose money trying to catch a rare high-quality 30 minute bar setup. Furthermore, I have better things to do with my time than sit around all day and night staring at a 30 minute chart, and I assume you do too.
Price action trading is especially impactful on the higher time frames because price action is naturally the clearest and purist reflection of aggregate market sentiment. When you combine the inherent clarity and effectiveness of price action trading with the power of trading higher time frames in forex, you have a very accurate forex trading strategy.
If You want to learn more about Trading Higher Time Frames and Learn More about How I Trade with Price Action, visit my forex course page here:> Forex Trading Course – Good trading as always – Nial Fuller
Wonderful information about time frames i have the same idea
thanks
Thanks a lot..
Have been following your article a year ago, read again and again, sadly never seen any improvement on my skill because I was keep trying on H1 chart without following the trend, not using money management and with bad RRR.
Last month the idea of finding good RRR popped out of my mind, i try to work it out on how to fit this into market together with a good RRR but only has a little improvement because still trading on H1 chart.
Then miracle happened when i decided to give a try on H4 and higher timeframe chart. Never thought it would be so powerful by using all of them together. It is true that beginner must master daily chart first and learn how the market move before moving to lower timeframe H1 or setting own indicator.
I’m trading with much lesser stress now and higher timeframe give me a little more time to alter my trade if the market change direction. Finally I have little grasp on how the market move and knowing why I failed on H1 chart. Will keep monitoring my performance.
Thanks again Nial!! Thank you so so so much! =]
Thanks for your posts , its amazing how higher time frames has improved my trading . will follow your posts and become a full time member as soon as i can…Thank you.
This may be slightly off topic but do your setups and advice to use higher time frames work for trading indexes? ( e.g. FTSE 100)
Really enjoying your articles and tempted to give forex a try on demo account, I started by looking at index trading.
Regards,
Adam
thank you for sharing your knowledge and for all the articles. They are very useful. I look forward to taking your course soon.
God bless
Lola
I’m very impressed at your way of looking at Forex. I will sign up for your course by the end of this month,I promise.
Cheers,
Michael
very good trading lessons.
These are articles are very good. I have never found this sort of help before. Hopefully this is a new beginig.
Regards
Maurice
Your trading is measured in risk reward, so you must adjust position size , thats all you need to do.
Olusola
Nigeria.
beautiful article.
Thanks
thanks nial
I am slowly learning this.
you have really brought hope nad direction to newbies like myselfand all i can say is a BIG THANK YOU.
THANK YOU NIAL!! you are great!
Many thanks for your articles. They are really instructional.
However, I would like to refer you to last week’s article titled-Risk/Reward: The Holy Grail of Forex trading. While using a 1hr chart of the eur/usd for your illustration, you stated:
“It is worth noting that trade setups on the smaller time frames are more likely to hit larger risk multiples since your stop loss will usually be tighter than it will be on a higher time frame”
How do you relate that to today’s article. I need some clarification please.
Thanks for your time Nial.
I always follow and read your articles because your ideas do really come from your direct experience which help us gain more understanding of the forex trade.Big thanks!
I am going to start looking at higher time frames after reading your article, I use a 5m time frame and its very tricky to win, thank you for your lessons, your a star..
just cant thank u enough for your inexhaustive efforts,wishing you God’s blessings!
I will start focusing my attention to the higher time frames, that should be rather easy to do; I got burnt enough on the lower time frames.
Hope you had a great Thanksgiving even though you are not in the USA. You don’t have to be in the USA to eat a turkey and just be THANKFUL.
HEY – I am THANKFUL for you and your great lessons that you share with all of us so generously.
vely good comment. the longer the time flame the better.Many tank you’s
As the time frame increases the number of signals becomes less. However the signals tend to be more reliable and more profitable than the signals from shorter time frames.
Day traders who trade 5 minute or less charts are competing against very experienced traders and computers! Much too dangerous for me!