Why Trading The Daily Charts Will Improve Your Trading Results
If
your Forex trading is not going the way you want it to and you feel
overwhelmed by the amount of market data bombarding your brain every
time you sit down to analyze the markets, you probably need to readjust
your trading strategy so that your primary focus is on the daily charts.If you are currently experiencing any of the following trading problems you will benefit significantly from making the daily chart your primary trading time frame:
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• Over-trading – Trading too much due to a number of reasons; greed, indecision, no trading plan etc.
• Fear of placing trades – You feel un-confident about which trades to take and which to pass on, this results in you getting “stage fright” and not trading at all, thus missing out on some good opportunities.
• Over-analyzing – You find yourself spending hours upon hours looking at numerous time frames and 20 different currency pairs. Eventually, you get tired and decide to enter a trade for no solid reason besides the fact that you have confused yourself to the point of exhaustion.
• Addiction to trading – You find yourself preoccupied with the market and with your trades all the time, it’s starting to affect your work life and your family life, all the while you are still losing money. You wonder why you are losing money while pumping so much time into your trading.
• Trading inconsistently –You have some good weeks and then some very bad weeks that erase your good weeks.
How not focusing on the daily charts can cause the above trading problems:
• Over-trading – When you look at every time frame available to you, you are naturally going to find more “signals”. However, signals on the lower time frames are naturally less reliable than signals on the daily chart because the daily chart works to “smooth” out the noise and randomness that can occur on time frames below it, thus showing you a more accurate picture of the market. This means you will trade less on the daily chart, but the trades you do take will naturally be higher-probability. So, in essence, you lose quantity, but you gain quality when trading the daily charts, not a bad trade-off when you consider your hard-earned cash is at stake.There are good signals on lower time frames like the 4hr and 1hr chart, but you need to master the daily chart before you can have any chance at successfully trading the time frames below it. Also, I never trade or look at any time frames under the 1hr as my years in the markets have proved to me that these time frames are totally counter-productive due to the inherent noise they contain and confusion they induce. There are many false signals on lower time frames and so you have to know how to properly trade the daily charts before you can understand how to properly trade the lower time frames. Also, once you start the ball rolling of over trading in Forex, it becomes an emotional roller coaster that is very hard to detect and stop.
See 15 Minute Chart Image Below, This Is An Example of what I call “Market Noise”.
See Daily Chart Image Below, This Is An Example of what I call “Clean Chart”.
• Fear of placing trades – When you are inundated by a vast amount of market data from news sources and numerous different chart time frames, you are naturally going to self-impose a certain amount of indecision and doubt into your trading. Also, when you do not have a trading strategy mastered like price action trading on the daily charts, you are naturally going to be more confused and thus less confident than you otherwise would be. In essence, you want to limit the number of variables you use to make your trading decisions in the market, because there are essentially an unlimited amount of variables that traders can confuse themselves with. Not focusing on the daily charts as your primary technical analysis time frame usually leads to confusion, indecision, and ultimately fear.
• Over-analyzing – Many traders spend hours upon hours analyzing fundamental data, technical data, and anything else they can get their hands on that they erroneously believe will give them more insight into the future track of the market. The problem with this thinking is that ALL variables are ultimately reflected via the simple and natural price movement of a price chart. The daily chart gives us the most pertinent view of the market in my opinion, so if you are not focusing mainly on the daily chart, you are probably spending too much time on other less-pertinent market variables that are only going to confuse you and cause you to enter trades that are based more on “guessing” than on sound price action trading logic of the daily chart.
• Addiction to Trading – This one is pretty simple; traders seem to think that by looking at lower time frames they are somehow getting a more accurate view of the market, simply because more data is coming their way. Well, they are right that they are getting more data, but they are wrong that they are getting a more accurate view of the market. Simply put, not every move in the market is significant; in fact, there are a lot of useless price formations and price action setups on small time frames, simply as a result of the nature of the markets. We have to move up to higher time frames like the daily chart to see what all the movement on the lower time frames actually means.
Many traders simply lose sight of the fact that higher time frames are more accurate and so they spend countless hours analyzing and checking their trades. Eventually they are so preoccupied with their trading that they are checking intra-day charts at work and constantly thinking about the markets. This is what happens when you don’t put the majority of your focus on the smoothed-out and more relevant view of the daily charts.
• Trading inconsistently – If you are confusing yourself by focusing on many different time frames and not focusing on the daily charts as your main time frame, you are very likely getting inconsistent trading results, at best. Traders who jump around from the 5 minute chart to the 30 minute chart and back again, are naturally less likely to have a consistent and smooth long-term equity curve than those traders who put their focus mainly on the daily charts. This is because traders using lower time frames are naturally going to be taking many more low-probability trade setups than traders focusing on the daily charts, and low time-frame traders are also more likely to over-trade, this means significantly less consistent trading results over the long-term.
How focusing on the daily charts can FIX the above trading problems:
• Over-trading – Daily charts help inhibit over trading because you get fewer signals but they are more accurate. Most traders over-trade from focusing on lower time frames. Thus, by moving your focus to the more reliable daily chart, you will have a natural guard against over-trading, that is assuming you are disciplined enough to only trade obvious signals on the daily chart that you have mastered previously by mastering one Forex trading strategy at a time.Note how the daily chart gives you less data to look at each day but it’s much more pertinent. The 30 minute chart gives you 48 times more data to look at since there are two 30 minute bars per hour in a 24 hour day. You are much better off learning to trade the daily charts so that you can see what all the market movement resulted in each day, rather than trying to analyze and make sense out of each little tick of the lower time frames….
• Fear of placing trades – Patience is very important in Forex trading and discipline as well, waiting for the best signals on the daily charts influences you to develop these positive trading habits. When you become a patient and disciplined Forex trader, you will naturally foster a confident trading mindset and this will work to eliminate the fear of trading that you may have experienced recently. The key to waiting for the best signals is of course knowing exactly what signals you are looking for.
• Over-analyzing – Daily charts provide for set and forget Forex trading and this allows you to spend less time staring at your charts and less time analyzing the market and all its variables. This is a good thing, more is usually not better when it comes to Forex trading, in fact, after you learn to trade effectively, you are better off spending as little time as possible analyzing the market and looking for trades. 30 minutes a day is all you need if you are focusing on the daily charts, this is of course after you have mastered an effective trading strategy like price action.
• Addiction to trading – Once you accept that all trading signals are stronger and more significant on the daily charts than any time frame below, you will be less likely to get addicted to staring at your charts and analyzing the market. People become addicted to lower time frames and watching the price movement, this is counter-productive and simply a huge waste of time. You want to trade like a sniper and not a machine gunner; the daily charts give you this ability.
• Trading inconsistently – All trading signals are stronger and clearer on daily charts than on time frames below, thus it makes your trading more effective and consistent over the long-term due to the increased reliability of the signals. Remember, trading success is defined by consistency, and if you want to have a steadily increasing equity curve you will need to slow-down your trading activity and learn to analyze the market from the more pertinent perspective that the daily charts provide.
The “real” Forex market close:
Trading daily charts that close at 5pm New York time is important
because this marks the end of the current Forex trading day and the
start of the new trading day as New Zealand trading opens. Closing
prices are the most important price in the market because they show the
settlement between the bulls and the bears, and because the New York
trading session is the second biggest behind London in Forex trading
volume, it’s very important to see this closing settlement at the New
York close instead of at some other more arbitrary time.In closing:
Finally, I don’t expect you to take my word for any of this, instead, go look at the daily charts for yourself, draw in the horizontal support and resistance levels and learn to spot the price action strategies that I teach. I feel very passionate about focusing on the daily charts, but I challenge you to prove to yourself why it is the best time frame to trade. One of the main reasons why most traders fail to make money is because they are stuck in a cycle of over-analyzing and over-trading on lower time frame charts. If you want to fast-forward your learning curve and learn to trade effectively as quickly as possible, check out my price action trading course here and learn more about daily chart trading with simple yet effective price action strategies.
About Nial Fuller
Nial Fuller is a Professional Trader & Author who is considered ‘The Authority’ on Price Action Trading. He has a monthly readership of 250,000+ traders and has taught 20,000+ students since 2008. Checkout Nial's Professional Forex Course here.Related
- Nial Fuller’s Price Action Forex Trading Course. Learn Advanced Price Action Strategies & High Probability Trade Entry Signals That Work
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Great trading everyone and Happy and prosperous 2017………………
Daily time frame gives clear market picture and helpful in making a trading decision.
Nice lesson. Very good.
These little reminders are invaluable as it is so easy to stray from the proven path.
I agree with you in that trading a larger/longer time frame like the dailies or my favorite the weeklies produces a much more reliable signal. The problem that I have with trading such a larger/longer time period is that my stops are also larger. This is a problem for me when I am trading a leveraged instrument like forex or futures b/c it leads to larger losses if they get hit. So as a result, I tend to focus on smaller/lower time periods to minimize my losses and I’m faced with some of the challenges above. Is there anyway to trade a larger/longer time period without incurring a greater loss? The only ways I can think of is to 1) not trade leveraged instruments (longer time frames work great on stocks, etfs, bonds, etc…) or 2) have really tight stops if I’m trading leveraged (but again I find that tight stops get hit a lot).
Thanks,
Mike
Babak
Georgina ,Kenya
Great strategy and simply super.
Thanks and regards,
Praveen,
Hyderabad,India
Realistically, if you only trade daily charts, how many trades would/could you do monthly?
Regards
Keep your awesome work
Nial Fuller is the king of forex….
Once again you hit the “nail on the head” of many inexperienced traders.(like myself).
To much lower time frame, too much analyzing, etc…..
Thanks for helping me to “refocus”…..
Toby
that true.
About a year ago, I made a commitment to learn how to trade. It has become my life. My only vice is following American football online. I won’t give up until I get it. Being in Japan has helped me to be able to participate in all the markets during the day.
The other problem following the dailys presents is that, I want to trade futures because I feel the price movement is much easier and clearer to follow. The financial commitment though is quite a bit higher for going live so I really have to have my i’s dotted and my t’s crossed before I go for it. In a way that is a good thing I think, but the amount risked is so high following daily charts. . .
I have found that the 6 hour seems to have pretty accurate and smooth information. going down to 4 hour chart
Sometimes in life you search for answers to problems without success and suddenly wham! uereka moment, this is what it means to have discovered you.
I have the same problem you mentioned about those trading lower time frames,
I will reposition myself to higher time frame.Thanks a million for the lecture.
If any trader winning every week/month with your method, would not be long before many brokers who go bankrupt and close?
Then we can not play anymore ???? Every month i can eat with price action strategy.God bless you
As you know, I’m very new to FX & as I’ve searched the Internet for education there is a LOT of information available (as much ‘noise’ on the subject as on the intra-daily charts), so it has been a breathe of fresh FX-air to discover your site & read of your simplified approach. I expect that the FREE component of your web pages would only be like crumbs from the table of your full course, but those crumbs are certainly insightful & beneficial to a newbie like me. Great work! Many thanks!
GOD BLESS YOU NIAL FULLER
Regards
From Samuel
Lagos, Nigeria
I have been trading FX for several years and periodically visit your site and read your articles. I totally agree with your trading advice which is to trade the bigger timeframes. The the proper application of money mangement and a robust strategy a trader you invariably make money. Making money from the markets is really as simple as Nial demonstrates. I would like to add that it is very important to let your profits run. Don’t panic and take the money. Protect your trade by moving your stoploss as your trade moves into profit. Safe trading everyone!!
I feel lucky that i do not look for shorter time frame. I have not experience that… may be in the future….I will see. Diary fit my personality and i can combined with work really well. Set and forget.
great article. thanks for your response.
mahdi
I feel like you were writing this for me!!
Im a newbie and started trading on the 5 min charts trying so hard and feeling anxious because of the timing of entry/ exit. Since reading your material I now realise I have to change and follow your sound basic fundamentals.
keep up the good postings,
A MILLION THANKS
Like a true GENTLEMAN , You are so caring $ helpful
to Trading Community at large.Please keep it up.
THANKS $ REGARDS, AMIN MALIK
Of course your opinion matters…YOU’re the one that’s successful and have proven that simplicity in trading is the key to longevity and consistency in the markets. DAILY charts (4HR) are the only TF’s I’ll trade. They DO reduce noise and market chatter + the reliability of signal is very high & profitable.
BIGGEST gain for me personally? Getting my LIFE back! I can’t tell you how many hours I’ve invested staring at screens and wasting precious time away from my family. Sad thing is…HOW is the world can I teach my kids how to trade “for a living” when all they see is me stuck to a screen, day in day out. Who wants to do that?
In all, you are a very successful trader, a sincere and passionate educator/mentor and speak the truth that so many struggling traders NEED to hear!
Thank you Nial…your insight and shared wisdom have changed my trading AND personal life for the better ;)
When I trade daily time frame charts it seems I almost always get stopped out over night. Is there a way to not get stopped out as often.The market seems to move a lot while I sleep. Usually over 75-100 pips.
your outlook and advise would be appreciated.
thanks
eddie
Hope you are well. Thank you again for another priceless lesson.
Thank you for all your help
Thanks and Regards
Gurpal
Thanks,
Pingwarrior
If there are TWO people in the forex world with this same desire for every trader to trade well and better, the world would be a better place than it is now.
Thank you again.
As I am a member of your great website; do you agree that drawing support and resistance lines depending on closing price are more effective than using highs and lows of prices?
Good Luck
Mamoun
but, i truly feel that highs and lows of candles being lined up is most obvious.
I agree the daily charts are best to trade. However it is also important to practise good money management. I don’t like to risk more than 2% / trade. To trade on the dailies where the stoploss can be up to say 140+ pips from entry means you need a large trading account size say 40,000 – 50,000usd. I study the dailies but look to trade the 4 hr or 2 hr because of this. In general terms I would say to trade 1 lot requires 25k usd a/c size to practise good MM. I would also say a lot of newbies fail because they do not practise MM and they are generally under capitalised. Any veiws on this welcome?
I know in my heart you are right, the only problem I have is identifying a reasonable (tight?) stop loss position. A comment on this aspect would be welcome.
Thanks.
thank you again,
Tobias from Germany
Very sound advice. Great course By the way. Very easy to understand. Patience is the key, I believe. Keep up the
good work.
Thanks
Sandy