Focusing your trading efforts on the higher time frames in Forex is the most efficient and effective way to make money as a trader. Most traders get caught up in trying to trade the lower time frame charts at one time or another in their trading career. Eventually most traders realize that lower time frame charts contain a ton of “noise” and random price movement, and so they are simply not effective tools to aid in making money in the markets. However, it’s very easy to not fully understand why trading lower time frames is much more difficult and confusing than trading the higher time frames.
When we discuss “higher time frames” we are generally talking about the 4 hour time frame and above. The most effective higher time frames to trade are the 4 hour and the daily chart. As you learn to trade Forex you really should be concentrating most of your efforts on these two time frames. The weekly chart is also very useful for identifying trend movement and significant support and resistance levels.
The problem with learning to trade Forex on the 1 hour chart or below is that the overall market picture is very unclear and “muddied” up by all the random price movement that occurs on these low time frames. Also, trade signals on the lower time frames are not nearly as effective as the same Forex trading signals on the higher time frames. The general rule of thumb is that the higher up in time frame you go the higher-probability the signal becomes. So, if you want to improve your overall win percentage, the easiest thing you can do is move up in time frame.
Another great aspect of trading higher time frames is that they make it much easier to manage your emotions correctly. It’s very easy to get stressed out and over-trade or over-leverage when trading the lower time frames because they are much more volatile and contain many more “false” trading signals than their higher time frame counter parts. Trading psychology is perhaps the most important part of successful Forex trading, so it’s very important that you learn to control your emotions and manage your trades correctly, trading the higher time frames makes this much easier.
As you learn to trade forex you need to realize that many people are going to try and sell you trading systems or strategies to use on the lower time frames. The problem with this is that they are just trying to sell you something and they aren’t actually teaching you how to trade or how the markets work. So, you need to find an educational system that actually teaches you something of meaning; that teaches you HOW to trade, and no matter what system or strategy you are using, this is most easily conveyed by teaching people on the higher time frames.
Click the following link to read more about how trading higher time frames drastically increase trading success.