By Cedric Welsch
If you are in that place where you are wondering if you should use a Forex trading hours chart or a daily one, you should first understand that when it comes to Forex trading, everything is resumed to pretty much the same thing, which is determining which way the trend is going. This is because it is impossible to trade with the trend if you have no idea where it is going. And when trying to find out the direction of the trend, deciding for a trade frame is the next big concern that most beginners have.
There are many different methods of doing single and multiple time frame market analysis. However, this article will cover a specific one using the Forex trading hour charts that you may find useful and compatible with your trading style. Specialists suggest newcomers in this field to choose their trend chart as the first thing they do. Now, some people choose a monthly, weekly, daily or even an hourly diagram. The next step is to select an entry graphic representation. The entry chart should be more dynamic, so it could very well be the 5 minute time frame. Lastly, the timing chart should be even more dynamic.
To better understand the principle, we should have a look at an example. Let us assume that you are utilizing a daily chart as your trend-chart. Therefore, you will be using Fibonacci ratios, price bars, trend tools or other types of analysis methods in order to determine the trend of the foreign exchange market. In this case you should be using a 4-hours chart as your entry graph, as this would best help you see if there are any patterns in the market fluctuation. If you thus conclude that both the trend and entry chart are showing signs of a downward trend, you should be looking at the 5-minutes graph to determine the best time for an entry. This is nothing else than the moment you actually place an order on a particular currency pair.
A good trader must have a strict plan on when to enter and when to exit a trade, and this plan is recommended to be based on at least two different time frames. This allows you to see the wider picture of what is happening on the market and what is the best time to enter it with a selling or buying order. In conclusion, ensure you make good use of the Forex trading hours chart and of the other time frame charts to not get fooled by the market’s fluctuations.
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