Forex trading strategy 17 (Trading Off the Daily Chart) Submitted by User on March 23, 2017 - 07:49. Submitted by Adam Many traders love the allure of the volatility of the forex markets and prefer to trade intraday by opening and terminating positions within the hours of each other. Trading the daily charts is not very common because many traders lack the necessary patience to follow a trade for weeks on end to its logical conclusion. There are many things that a trader will gain by trading off the daily charts. In the first instance, we must be very familiar with the saying that the trend is our friend until it ends. The only way to determine the true trend for a currency is to look at the daily chart. A typical daily chart snapshot will show the price action for weeks at a time. You can then tell just by looking at the chart to see whether the trend is up, down or ranging. The chart above is the daily chart for the USDJPY. It is very clear from inspection that the currency pair is in a very strong uptrend after a long period of consolidation that lasted close to a year. Using short term charts will not give the true picture. Trading off the daily chart will reduce the frequency of trades, but will also allow the trader more time to assess a trade setup and trade it with greater certainty. Trade targets are larger, and a trader can make money from a few trades that will far outstrip what he will make by chasing pips all over the place. One trade I love to take off the daily chart is the retracement trade. Pullbacks are a normal part of trading because there will always be early bird traders who got into positions very early in the trend and will be looking to take some profits off the table. When they offload their positions, the price action of the currency will retrace. Now I am usually interested in the continuation of the moves in the direction of the trend. For me to do this, I need to know where the retracement will come to an end. With 5 points to choose from the Fibonacci retracement tool, I need to get a clear idea of where to make my entry. The tool I have found most useful is the Stochastics oscillator. When it crosses at overbought or oversold levels, it gives me a clear indication of exactly where to make my entries. From this daily chart above, the Stochastics crossed at oversold levels of 24.1 at the 50 Fibonacci retracement line. An entry here would have produced 250 pips as at the time of writing this on March 20th 2017. This is a simple strategy that works all the time. Trade the retracements off the daily chart. This Forex trading strategy article was provided to us by Adam at ForexAccounts. net .3 Tips For Trading a Daily Chart Identify the trend to form a trading bias using 6 months of price data. Time your entries, and wait patiently for trading opportunities. Managing risk is an important step in trading the Daily Chart, plan accordingly. Novice and veteran traders trying to trade the Forex market with daily charts run into a variety of hurdles. Often these longer term graphs can be deceptive and have traders falling for predictable mistakes. To help combat some of these issues, today we will review three helpful tips for daily chart traders. 1. Find the Trend The first tip for trading a daily chart is finding the trend. One of the benefits of trading the daily chart lies in the long drawn out moves of the Forex market. One way to identify the trend is to look at half a yearrsquos worth of price data, or roughly 180 periods, and then identify the swing highs and lows created by price action. While this number of periods can be moved up or down to your liking, having a reference will keep you from looking at too much price data which substantially increases the difficulty of finding the trend. Below is an example of a 6 month trend on the EURAUD. Going back and referencing this price data on a daily chart allows us to identify market direction, while creating a trading bias. If the trend is up, daily chart traders will wait patiently and look for opportunities to buy the market. At no point should we consider trading against the trend. Learn Forex ndash EURAUD 1866 Pip Daily Trend 2. Remain Patient Why go through all the pains of finding a trend, and having a market trading plan if you arenrsquot going to use it Daily chart traders need to avoid the bug of having to be in the market now. This can be incredibly difficult especially if you are watching markets on a daily basis. Remember that trading with Daily Candles may only yield one or two appropriate positions on a single currency pair for a whole year. This means staying out of the market and keeping your trading capital free until an opportunity emerges. The easiest way to remain patient is to keep a trading journal and join a trading community. In my experience this allows you to hold yourself accountable for following your trading strategy. For instance if you are trading with CCI on a daily chart, such as the example below, your trading journal should only show two entries If your report is showing something different, it is time to reevaluate your trading plan. Learn Forex ndash EURAUD CCI Entries 3. Use Larger Stops and Less Leverage Traders that are trading on a daily chart should be aware of the larger intraday swings of the market. The main focus for this is to avoid being taken out of the market prematurely. One indicator a trader can use for this is ATR ( Average True Range ). ATR can help you find the average movements for a pair for a given period of time. Once this value is found, you can use a multiple of ATR to go about setting the Risk/Reward level of your choosing. Remember, using larger stops doesnrsquot mean you have to put more capital at risk. One frame of reference is to never risk more than 1 of your account balance on any one trade. Using this rule traders can still trade conservatively even on a daily chart by limiting their leverage. Even if you are trading with a large or small account balance, if you are having problems with this consider using smaller lot sizes. ---Written by Walker England, Trading Instructor To Receive Walkersrsquo analysis directly via email, please SIGN UP HERE Interested in learning more about Forex trading and strategy development Signup for a series of free ldquoAdvanced Tradingrdquo guides, to help you get up to speed on a variety of trading topics. Register here to continue your Forex learning now DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Trading for living only using daily charts or higher. Joined Feb 2007 Status: Member 476 Posts Dear Friends, As I start learning to trade, I see, recognizing trend and trading using a daily chart to be much easier than trading with 1 hr chart or lower. Clearly, this would mean less pips compared to day trading. I was wondering, is it practical to make a living out of trading just by trading daily charts. For a minute, if we assume this is possible, practically, you would be spending an hour or so, every day to make a living Appreciate any inputs from the senior traders in the forum and others who might already have achieved it. Many Thanks in advance, TradeStar Haste not to Enter AND Haste not to Exit - TradeStar Commercial Member Joined Sep 2005 1,122 Posts It is possible and many people do it, but you cannot do it with the average US10K intraday-trading account. Longer time frames require in my opinion beefier accounts. Commercial Member Joined Jan 2007 1,442 Posts This is certainly possible but it depends on how much you need to make a living and that in turn requires how much you would need to fund your account with. If you need 2,000 per month to make a living and you think you can return 5 a week on average (which I personally think is feasible) then you need to fund an account with 10k. But you should also consider that you should look to return more than you need so that you can not only pay your wages but increase your pot to make things easier in future. If you are leaving work and considering trading then I can give you some useful advice, since I have done this and it proved to be a big mistake at the time. a) Make sure you are fully capitalised. That means working out, as described above, how much you need to trade. b) Make sure that you have a cushion of at least six months salary minimum. This takes some of the pressure off - trading off of daily charts often requires large stops which in turn results in more risk and you get less signals so finding very good setups requires a huge deal of patience. If you feel you have to consistently make money, you are much more likely to take bigger risk or trade more frequently which is the reason why many traders fail in my opinion. c) Have a plan so that you trade with confidence. Know what setups you are looking for, how much to risk and how often you expect to win. d) Make sure you structure your day in advance. This is vital. When you are only spending an hour a day working (studying the charts) you may soon become depressed and disillusioned. Believe me when I say that I was desperate to leave my boring 9-5 and become independent. Within five months, I could hardly bear waking up each day at home in my flat with no one to talk to and no one to see. Hope this helps, Tom Please note: I cannot respond to PMs but you can email me via my profile. Make sure that you have a cushion of at least six months salary minimum. This takes some of the pressure off - trading off of daily charts often requires large stops which in turn results in more risk and you get less signals so finding very good setups requires a huge deal of patience. If you feel you have to consistently make money, you are much more likely to take bigger risk or trade more frequently which is the reason why many traders fail in my opininon. Agreed. 100. Being under capitalised causes most quottradersquot to fail before they get started. I would like to comment on this because I think a lot of us have this mentality. If you wake up and see your account is positive, take a minute to sit quietly and think rationally. You need to focus on the fundamental thing that your position is now telling you. You have called the market and you are RIGHT. We know by its very nature that the market goes up and down and as a result we worry that we may give a portion, or worse, ALL of our profits back. I quote from memory of someone elses work (I forget whose) when I say that we are quottaughtquot from an early age that: a) if we lose something it will eventually come back (e. g. you lose your car keys, dont worry, they WILL turn up) b) if you see something, take it or you might lose the chance (e. g. if you see money lying in the street, pick it up quickly because it may not be there for long) This translates into trading. if our position goes against us, we tell ourselves not to worry because nothing goes one way for ever and it must surely come back. If we are winning, we want to get out quickly because if we come back later, all our profit may all be gone. It is hard to overcome this because it has been quotprogrammedquot into us. To be a good trader (particularly on daily setups) in my opinion, requires going against what we have had ingrained from an early age. To put it simply, it requires going against human nature - what our heads and our hearts tell us. Its so cliched its boring. And yet all traders that dont make it into the elite 5 suffer a manifestation of the same problem. They are either not cutting losses early or not letting their profits run. I, like you, wondered how it was possible that the market always reversed after I got out. Late last year I went long the GBP at around 190.00 targeting a move to 2. Lets just say I was early but I was convinced it would happen. Well, the market began to fall. And I held and I held. When it got down to around 1.85 and the pain was so high from losing 500 pips that I could hardly sleep, I bailed out. And what happened The market turned at almost exactly that point and only a few weeks later it was trading at 1.98 - a full 800 pips up on my entry. Now whether I am right or wrong I will tell you how I see this in my head. I see it as the market having to turn because all the amateurs like me have held their position for so long, past so many logical places to get out that finally the pain is FORCING them to bail out. And once the weak having been shaken from the tree, the market is ready to move up again. As I said, this may be wrong, but this is how I like to view it. So how do you overcome this Pick a point before you place a trade that, if the market hits, proves you are WRONG in your analysis. If you see, for example, a double top, and want to go short, place your stop a little way above the double top. I have done this before, shorted at what I consider a top, only to see the market move up through it. Rather than close, I would then move my stop further and further away with the reasoning, this climb cannot go on, its got to fall. its just a market fake out. it will come down. But here is the point: Who cares if it comes down an hour later Or the next day Your reasoning is that the double top is the turning point. If the market trades through it, you are WRONG. This is NOT the top. What if it was only a fake out and the market then plumments You likely end up frustrated . What if it wasnt and you move your stop further back, cant face taking the larger loss and move it still further back again You could end up with nothing. And I know what I think is worse. Remember, the market has a way of frustrating every trader but the greatest traders are flexible. If you are wrong in the short term, get out, get on the sidelines where your head is clear and wait for the market to move in the direction you thought it would. Timing is everything when you are trying to make a living do this. If your timing is wrong, then get out. Sometimes the market may give you another chance but you can bet the time you need it to most, is the time you will get dragged out. This may make you laugh but it took me, personally, just over two years to realise this simple truth: You have no control over the market. You cannot influence where it goes. The market doesnt know who you are, it doesnt care who you are or what you could lose. It goes where it goes and you either ride it or you get run down. So, ok, thats how you should cut losses. How about letting profits run Well, all I can tell you is my own experiences and ways of trying to do this. For me, a key thing to remember is NOT to look for reasons to exit a trade once it is going well. I did this a few months back with the GBP/JPY. The trend overall was firmly up but it had suffered a rather sharp pullback over a few days. Then it had bounced at an ema that I use and began making its way back up. So I got in based on this DAILY bar and near the end of the day it was up just over 100 points. I started thinking 100 points is a lot, the amount I am up is now considerable and I started seeing reasons to exit. Suffice to say, I found a good one - the stochastic was overbought on the HOURLY - it was running along steadily just above the overbought line. so, out I came. In the asian session, the price steadied and while it did this the stochastic came slowly down to oversold and then began to turn up. but the price just hadnt had the pullback. To cut a long story short - a few days later the market was up 1,000 ticks on my initial entry. For me, the emotional pain I felt at being in it, then exiting and missing the massive move, was the same as, if not worse to just having LOST in the first place. So at the time I saved the chart of this because it hurt me so much to have exited early. I spent five months trading from home and gradually lost all my money. Looking back, that one trade could have been the difference between me being still at home trading for a living and where I am now - which is back in the daily 9-5 in an office doing a job I hate. So - of utmost importance - remember why you entered the trade in the first place. Sometimes you learn something when you least expect it. I actually had an epiphany of sorts when my girlfriend who knows absolutely nothing about the markets at all said to me: quoteveryone has different reasons for doing things - they all play the game a different wayquot - This is the reason why the market goes up and down. Everyone is buying and selling based on different thought processes. Different strategies. Different methodologies. But your reason is based on YOUR methodology so forget the other players. Let the market guide you. In my opinion - a 20 tick pullback in a 100 tick move up is not a sign that the move is reversing. It is natural and it is inevitable. Consider the other market particpants. In the short term they may want to scalp a small move or they may be hedging and therefore taking a position for another reason UNRELATED to profiting. They may even simply be amatuers with their inevitable way of thinking - quotthis cant go any higher. quot They will cause temporary fluctuations in price but actually exiting a good trade should be done when YOUR reason for entering is WRONG not just because it is suffering a temporary setback. I personally use price action. So, if I enter on the break of a pin bar, (with a stop loss lets say, of 100) I EXIT either when: a) The daily bar gives me a sign the move is over and that signal is then CONFIRMED e. g. Signal is pin, confirmation is break b) My stop is hit. If I get in a trade and the market is up 300 ticks on the first day, I still have my stop loss where I could lose 100 if I get hit. For me, being UP is not a consideration for getting OUT. Some people take these signals and close on the FIRST DAY because they have made a killing. Just think for a second. You are trading off a daily bar. Youve had just ONE go in your favour. Try this. Look at a massive trend that you would like to have caught. Now count how many daily bars made it up, from bottom to top or vice versa for shorts. Now consider exiting on the first one that goes your way. Of course some people dont like to play this way. They like to take profits or they like to scale out as it moves their way but I am talking about being a trend trader and playing daily bars to capture the move or at least a large part of it. Most importantly is stick to looking at your timeframe. Many of us make the mistake of entering on a daily and then watching the trade on an hourly. Think logically - an overbought stochastic on the hourly is not a sign to exit a long on the daily. I would add finally, that it is always an eye opener when you read about how other traders have managed positions. If you research some of the best and highest earning traders in the world and follow what they did on the charts you will find as I did that if you took the same position, the moment you would look to exit is usually the moment that they are looking to ADD to their position. Look at the traders that made a killing in the incredible fall that happened in Natural Gas futures. Go and look at a chart of that market. On a daily you wonder how anyone that saw it didnt get rich. Its straight down. But then imagine being actually in it and seeing a sharp two day spike up from all the bargain hunters. most of us, if honest would be long gone, patting ourselves on the back with our profit even as the market turns and falls through the floor. So to sum up: Have the strength of your convictions. There are some traders that aim to take 10 pips a day - fine. If that is your style then by all means do that. But if you want to trade off daily charts and make a living and if you consider that a stop on a daily chart may be 100 ticks or more, dont be rushing for the exit when you make 50 or even 100. This is not to say that any trader should hold blindy. But try and be logical. Look at price action and let it tell you where the market is going over the time frame. And remember the other participants in the market. When oil went from around 75 down to around 55, of course you are going to get people coming in at 65, then around 60 - this is natural. but this doesnt necessarily mean there will be a reversal - there is always a tug of war in the market. but someone is going to win. and if you are patient, that someone may be you. Please note: I cannot respond to PMs but you can email me via my profile. Joined Apr 2006 Status: Suaviter in modo, fortiter in re 1,851 Posts I would have liked to have posted that reply Wiz, but to answer TradeStars post in my own way, and back up your points, Ive added an image of some of my current trades. TradeStar, check out the entry dates, go back and look at the ups amp downs since entry, and see how, as you develop your methodology, and experience, you wont jump out of trades at every reversal. It does take courage at times, but if you thought you were in a good trade at the start, and your stops are based on MM logic, then hang in there. One of the other pro traders (cant remember who) uses a method whereby if he gets stopped out, he immediately enters an order at that point. The idea being that if the thought processes behind the original trade were correct, and hes been taken out by market noise, as the original trend resumes hell be back in at the point of the stop loss. Originally Posted by TradeStar forexfactory/images/buttons/viewpost. gif Only issue is, I still lack the courage to let the profits run. I wake up and see pips and bang, I close it and it continues to go up.. Commercial Member Joined Jan 2007 1,442 Posts I would also like to say that whether or not you want to, or agree with, system trading, if you try it you will have an INVALUABLE learning experience. I personally like to use discretion when trading price action setups but I had a stint of several months trading a trend following system rigidly. Ultimately it didnt work out as well as I had hoped but it taught me two essential traits - patience and discipline . Patience to wait for the signals and not trade until I saw one and discipline in exiting ONLY when the system told me too. I managed to capture some very good moves that I am sure I would have exited early otherwise. So, if you want a good grounding then try a system. Please note: I cannot respond to PMs but you can email me via my profile. it is depend on your standard of living. and your way of living Very true. And while i would never hint that a particular lifestyle that i might find satisfying and enjoyable could be so for another, i can state for myself i see many wonderful possibilities that take little income to sustain. For instance, my wife and i are very close to moving back into a recreational vehicle full time now that our nest is nearly empty. Along with this change will also come more opportunity to get out and enjoy our love of prospecting and rockhounding. I know of several couples that prospect for gold and make a living on just that alone. Sure, its not the quotIve got a 4 million dollar mansion, 8 car garage lifestylequot. but they are living their dream in a simple-easy-to-sustain, enjoyable, and healthy lifestyle together in natures beauty. this is the reason im making the shift away from the shorter (60m and under) charts and now focusing my energies on the 4hr charts and above. After two years of trading nearly 6 to 8 hours a day i reaslized this style of trading was not going to allow me time with my wife and our mutual goals. Food for thought. . ) Thom
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