An hour a day is all you need to successfully trade –
With the advances in technology and easily accessible information, the forex market has seen a surge in the number of participants in recent times. A laptop or desktop PC with an internet connection is all that’s required to trade the markets. More and more brokers are offering traders the option to trade on Smartphone’s or Tablets meaning trading can take place almost anywhere with relative ease.
Contrary to popular belief, trading need not be a time consuming activity. An hour or two a day is all that’s required to successfully trade the FX market. Many trades make the elementary mistake of over analyzing and over complicating their approach to the markets.
Its true the Forex market is a constantly changing environment, however, attempting to react to every change the market makes is unwise and near impossible. Reacting to price changes and patterns on higher timeframes has proven to be a lot more time efficient and can produce better results in the long run. With the market being open 24hours a day 5 days a week many trades fall into the trap of thinking they need to be trading and analyzing the markets all the time.
The market has 3 main trading sessions: Asian, European and U.S. Obviously with traders being located all over the world, trading all three sessions can prove to be a difficult task for an individual trader. Each session varies in volatility and activity. The Asian sessions tends to be quieter with the main action usually occurring in the European and U.S. sessions.
The best and most reliable market analysis should be taken from a higher timeframe (Daily/Weekly). With each trading day starting at the open of the Asian session and finishing at the close of the U.S. session, traders can set a specific time of day to analyze the markets meaning they do not need to sit in front of their screens all day waiting for something to happen.
Analysis of the daily charts is best done at the end of the U.S. session at the open of the new trading day in Asia. A trader can analyze yesterday’s market action using the daily chart and determine what trades, if any they plan to take today.
How to analyze the markets using a daily chart –
View the markets once a day at the end of the U.S. session and open of the new trading day in Asia.
Analyze each pair you actively trade separately preventing you from letting another pair influence your analysis.
Identify specific support and resistance areas and note any new swing highs or lows the market made during yesterdays trading.
Evaluate yesterday’s price action. Make a note of yesterdays daily chart pattern. For example, did yesterday’s price close the day with a pin bar, Hikkake etc…? Or did it simply do nothing?
Decide what, if any, trades are going to be taken today.
If your analysis suggests you will take a trade, place the trade after determining your entry, stop and target, not forgetting your money management and Risk: Reward ratios.
Leave the market alone. Step away from your screen as your market analysis has now finished.
Come back at a later time in the day or at the end of the day to check on your trade and decide how you wish to manage the trade from here.
Do the same again the next day remembering not to spend to long over analyzing and over complicating.
As you can see, daily market analysis need not be a time consuming activity and should only take one or two hours a day. It’s wise to keep a note pad or diary with you while analyzing the markets remembering to jot down specific details your analysis suggests. Keeping a diary or note pad of this sort is not only a good habit to keep, but will give you a better understanding of the movements the markets makes each day providing easier and enhanced analysis as time progresses.
Once a trader becomes proficient in trading higher timeframes such as the daily charts mentioned above, they can move to a lower TF such as the 4hr chart. The same analysis can be taken on the 4hr chart as the daily, however this time the trader should analyze the markets at each close of a 4hour candle.
Proper market analysis is crucial to the success and longevity of a trader’s career. Market analysis should not take more than an hour or two a day and should be kept as simple as possible. It’s wise to remember when trading to, K.I.S.S. (keep it simple stupid….!) Once a trader has become proficient in proper market analysis trading becomes second nature, resulting in better performance and profitability.