Once all the stops and weak positions traders not completely dedicated to this first move after the open have been cleared out, the initial move slows and often reverses. After these initial price movements have taken place, the next move — our breakout - is more likely to have conviction behind it because all the weak positions were shaken out of the market in initial rate swings.
Scalpers look for quick, small trades. They will not be trading on the M30 or H1 time frame because they create new candles or bars too slowly to know what is happening minute by minute. A scalper sticks to short time frames like the M5. An intraday trader will stick to the H1, or in some cases the H4 time frame, for their systems, because the moves are slower but bigger. Swing traders like the really big moves so they like to use the D1 or possibly the W1 time frame, depending on their trading strategy.
More trade opportunities by only needing to hold a trade a short term. The trades are small and more numerous, so your fees will be higher due to frequent trading. Moves happen so fast it can be easy to get stopped out by spikes and small reversals. The trading will be intense due to quick short moves and the need to have amazing timing.
You will be able to use solid trading methods and have time to analyze the trades. You will still have opportunities for multiple trades within a day. Moves are slower and you can usually see reversals or stalls and have time to react intelligently.
You will still have more trading fees because of frequent transactions. Your entry and exits may not be as precise. The chance to look at longer term trends and make larger amounts of pips. Less likely to get stopped out because of reversals or sudden market changes. You have more time to watch the trade and make wise, less emotionally driven decisions. Not as many trades made, so you will have less transaction costs. There will be less trading opportunities. Trades will be held overnight so you are subject to those fees.
With less trading opportunities you need to make sure your system works really well on the longer time frame, as you will naturally get fewer setups while swing trading. There is no right or wrong, best or worst trading chart time frames to trade on. Like other smart trading decisions you use the time frame that best works with your trading style and system. Take the time to observe and understand how they all work together, so you can be as successful a trader as you aim to be.
Notify me of followup comments via e-mail. The forex market operates around the clock, thus not only does one need to be concerned with price movements, but they also need to know the importance of the time at which they are trading.
By utilizing certain trading strategies at certain times, traders have a better chance of realizing profits. Different currency pairs are prone to somewhat more consistent movements at differing times of the day. The following day trading strategy takes advantage of price change patterns but couples the pattern with a time frame that makes the pattern more reliable than if traded at a random time. Knowing the relationships between pairs can help control risk exposure and maximize profits.
We are looking for movement on both sides of the Frankfurt opening price. Trading begins in Frankfurt around 7am GMT. This is the bar we will use for our opening price. Because we are going to wait for at least a pip movement above and below the open price, it is common to wait an hour or more for a tradable breakout.
Until the breakout occurs, we do not enter into a trade using this strategy. This is because the only market open right before Frankfurt and London is the Tokyo market. The cable is lightly traded on the Tokyo exchange and because of this, there is more volatility when traders enter the market around the Frankfurt opening time, which is followed shortly by the London open.
Some other currency pairs are more evenly traded throughout the day and thus this strategy is not as effective. It has large swinging moves that create excellent profit opportunities.
Where there are large swings and profit potential, there is also the probability of being stopped out. We wait for the market to move both directions before entering a trade so we can reduce the likelihood of being stopped out of our trade.
After these initial price movements have taken place, the next move — our breakout - is more likely to have conviction behind it because all the weak positions were shaken out of the market in initial rate swings. Logic Behind the Strategy Traders often put stops just outside ranges. When the market opens, and a direction has not been definitively established, these tight stops are triggered by the increased volatility of the open.
Stops on one side of the opening price are triggered, pushing rates out of the range and giving the illusion of a breakout. Once all the stops and weak positions traders not completely dedicated to this first move after the open have been cleared out, the initial move slows and often reverses.
The same thing happens on the other side of the opening price. All tight stops around the open price have been triggered and now the market is ready to make its first real move. This move is more likely to have strong traders and positions behind it and be based on more solid fundamental and technical criteria than the initial weak moves triggered simply by increased volatility.
We enter a trade after this noise and stop triggering has subsided and the market is making its first strong move and triggering a breakout of the either the high or low of the range established after 7am GMT. The morning session does not always play out in this fashion; patience is required in finding the pattern.
Example The example in Figure 1 shows how the strategy works. The blue vertical line is when trading begins at 7am GMT. The two blue horizontal lines mark the high 32 pips above open and low 33 pips below open made after our open of 1. The market moves down, setting the low, then rallies to set the high and then breaks below the low again. We enter one pip below the old low at 1. A stop of 40 pips is set.
When the market moves down 40 pips or the equivalent of our stop , we close out half the position and change our stop order to a trailing stop of 40 pips. The remainder of the position has a pip trailing stop. The market in this example continued to move down to 1.