Time Frames in Deciding on a Trade

By Igor Titara for Forex Article Contest

A very careful trader should observe 1D chart before entering a market position. You may ask “why?” The answer is that bigger time frames indicate a general trend.

What is better: scalping frantically 5M or think in a general tendency to coordinate the movement of the price at 1D time frame?

Traders like George Soros are not concerned about 5M time frames…Professionals prefer thinking of higher resistance and support in order to "hold" their profits with less risk margin. In fact, it is necessary to make the probabilities act in your favor.

If there is an undetectable rise in commodities like Gold, then there is a greater probability of price going up until it faces resistance. We must remember that when watching the Gold dynamics it’s possible to find slight pullbacks. By pullbacks I mean little movements of correction or contraction.

The reader may have noticed that the rate of depreciation/appreciation and volatility influences the market modification? The price is directly correlated to the velocity of modification. So, if you notice AUD/USD with a strong decline in prices due to a poor performance in the Australian unemployment rate, the price will keep going down. And if the length of a candle is higher than usual, you should be ready to enter the market with high probability of success.

Case 1: (XAU/USD 4H)

The prospect is bullish for gold, and the trend can already be observed at the beginning of the week. In the following days, the overall price of gold continues appreciating in value. Have there been pullbacks? Yes, of course. But there was a breakout up, as well.

Case 2: (AUDUSD M30)

The Aussie outlook on a 30 minutes chart is bearish, and the tool is immediately oversold in the Asian session. In the following days, the Aussie should continue devaluing, but due political news, the price declined further to find a support. Have there been pullbacks? Yes, of course. But there was also a breakout down. And then, Aussie regained its price, refusing to decline more.

Some elements of appreciation and depreciation in the price on technical perspective:

INTENSITY (red and green candles);

VELOCITY;

TIME;

SUPPLY;

DEMAND;

Some elements of appreciation and depreciation in the price on technical perspective:

GREED (guided by agents that form the market);

FEAR;

POLITICAL INSTABILITY;

ECONOMIC NEWS;

If you prefer to trade every week, or for 5 consecutive days, then notice patterns or well-defined patterns, which I assume will help you be a success.

Examples:

Breakouts – UPs and DOWNs;

Engulfing Patterns, for example, bullish or bearish engulfing;

Intensity of change in price in a short time period;

CCI oversold / overbought;

Political volatility;

In times of high volatility, it is natural that prices fluctuate with very high speed. So don’t do anything until a new standard is established. Some of the most favorite charts for swing traders are the 4H charts.

Summing up, I advice observing general trends that give you a better view of the situation.

Do not act compulsively in order to enter the market! Forex fluctuates every day, so please be patient. Often the exit is more important than the entry.

Let me finish with a wise proverb for you to think about it: "Candles exhaust themselves to give light to people”!

The article is written by Igor Titara and is participating in the Forex Article Contest. Good luck!

 

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