Importance of multiple time frame analysis
There are many ways of trading the forex market in today’s world. Every trader has their own unique trading system which is being developed based on their personality. Some of the new retail traders often buy trading strategy from the expert to make a decent profit but still, they fail. In order to trade with expert traders trading strategy, you need to have a very precise knowledge of the currency market. The expert traders at Saxo always suggest the rookie traders read as much as they can since it enhance the trader’s knowledge. Though there are many techniques every expert uses the multiple time frame analysis to filter the best possible trades in the market.
What is multiple time frame analysis?
Those who are new in forex trading industry will not understand how the multiple time frame analysis works. But to be honest this system is extremely simple and you can easily sort out the false trading signals in the market. You need to do your technical analysis in the different time frame for multiple time frame analysis. For instance, if you look for trading signals in the GBPUSD pair than then you need to do your technical analysis in at least three different time frame. And when you do your technical in more than one-time frame it is known as multiple time frame analysis.
Which time frame should we prefer?
The answer to this question totally depends on the traders’ personality. Most of the long term traders use daily, 4 hours and weekly time frame to do the multiple time frame analysis. They use the weekly and daily chart to find the existing trend of the market. Once they find the prevailing trend they switch back to the 4-hour time frame and wait patiently for the price action trading signal. If you are new to this price action trading strategy then try to master this skill since it will allow you trade the key support and resistance level with the extreme level of precision.
Know your trading platform
As a professional trader, you should every single bit of details of your trading platform to save your time and money. Instead of watching the price movement 24 hours a day try to use the limit orders. Though this will save a huge amount of time when place any limit orders make sure that you are not risking any amount which you can’t afford. Try to place your trade in favor of the long-term trend since it will greatly reduce your risk exposure. If you consider trading as your full-time profession then you should also select your broker very cautiously. Always make sure that you are trading with a high-class broker so that you can experience the best possible trading environment.
Do the fundamental analysis
When you do the multiple time frame analysis you also need to do the fundamental analysis. The professional traders often consider it as the most powerful price driving catalyst in the financial sectors. Some of the new traders often find it hard to synchronize their technical analysis result with the fundamental analysis but in order to execute the perfect trades, you must find the harmony in between these two types of analysis. Try to read the financial news and always keep yourself up to date with the latest market happenings. And never trade the market when during the high impact political speech.
Multiple time frame analysis is very important for the full-time professional trader. As a new trader, you can easily filter the false signals and execute the best trades by using the method of multiple time frame analysis. But no matter which trading system you use or the quality of the trading signals never trade with the money that you can’t afford to lose.