I believe there is some sort of obsession right now in the forex trading community with the lower time frames. Perhaps it seems more profitable or glamorous to trade within the minutes and to get very small profitable trades with high lot sizes but the actual reality of the matter is that lower time frame systems with higher frequency trading often achieve the same degree of success that higher time frame strategies with much more effort and time requirements (plus a LOT more commission paid up in spread). I for one believe that the use of the higher time frames is unequivocally one of the best tools people have to become successful forex traders with low stress levels, I personally absolutely love the daily time frame for my long term trading strategies and it is in fact the lowest time frame I ever use when personally handling an account.
What is so great about the daily time frame ? What makes it such a great tool for anyone who wants to become a successful trader (using either manual or automated techniques) ? Within this article I will give you the five main reason why I absolutely love the daily time frame and why I believe that system development and use within it is an extremely educational and profitable endeavor most traders should - at least - try for a year or two.
Just a few minutes each day. One of the great things about daily charts is that - as the name implies - they only have one new bar each day. This allows you to easily execute any trading strategy with very little time since it only requires a few minutes to check the new bar and input the signals. You know the exact time when the bar is closed so it is a chart that allows you to execute strategies when you don't have or you don't want to spend a lot of time in front of charts.
As successful as the lower time frames. Systems on the daily charts can be as profitable as systems traded on much lower time frames and - as a matter of fact - many times the trading costs are much smaller due to the reduced trading time. It is a myth that shorter time frames are inherently more profitable, there are daily strategies and short time strategies that work great but strategies in the daily time frames usually aim for very high gains over long periods of time reason why they may take more time to show their true profitability levels.
Broker dependency is VERY small. After using a script to remove Sunday candles (if present) daily candles show very little variation between different brokers. This means that the results of your system will be similar between brokers and the broker will be able to do very little to alter the results of your strategy since any slippage, re-quotes, etc are bound to represent only an extremely small percentage of your average profitable trade.
Always trade with the trend. Daily time frames offer you the ability to always trade with the developing trend while smaller time frames may sometimes get to into trades that temporarily go against long term trend direction. This allows you to have more peace of mind since you know that the market is moving with you. It is also true that most successful traders and market movers also use the daily time frame to do their trading so since you are using and looking at what professionals are actually looking at your chances of success are increased.
Stress-free trading. Maybe not entirely but the daily time frames allow you to trade a system and not worry about how it is doing every second. When entering trades on higher time frames small movements are not very significant and therefore you can just set your trade and leave it with confidence that the possibility of something bad ruining it is small. Weekend gaps will most of the time not be a problem since your trading targets will always be very large and the small indecisive days and "blurry" short term charts will not be something you will need to concern yourself with.
Of course there are a few reasons why almost no new traders use daily charts particularly because of their desire to stay within the market a lot and their impatience to get profitable results. Certainly long term trading systems on daily charts are not so glamorous or fancy but they offer easy-to-evaluate trading setups and easy to understand logic that can be applied with confidence when adequate evaluation with profit and worst case scenario targets is achieved. With daily time frame systems this is especially important to do since these systems can usually have long and deep draw down periods that can last several years (alike some short term trading systems) but overall their profitability levels end up being similar to those of short term trading systems.
So in summary I believe that every trader should do at least a few years of trading with a daily time frame based systems at least in parallel with his regular trading activities (if they don't involve this already), just a few minutes everyday, sound robust trading techniques and long term results are some of the great reasons why the use of this time frame has paved the way towards the success of many new forex traders. Certainly you can be the next one :o).
If you would like to learn more about evaluating strategies by programming them into the MQL4 language to get accurate profit and draw down targets please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !
What is so great about the daily time frame ? What makes it such a great tool for anyone who wants to become a successful trader (using either manual or automated techniques) ? Within this article I will give you the five main reason why I absolutely love the daily time frame and why I believe that system development and use within it is an extremely educational and profitable endeavor most traders should - at least - try for a year or two.
Just a few minutes each day. One of the great things about daily charts is that - as the name implies - they only have one new bar each day. This allows you to easily execute any trading strategy with very little time since it only requires a few minutes to check the new bar and input the signals. You know the exact time when the bar is closed so it is a chart that allows you to execute strategies when you don't have or you don't want to spend a lot of time in front of charts.
As successful as the lower time frames. Systems on the daily charts can be as profitable as systems traded on much lower time frames and - as a matter of fact - many times the trading costs are much smaller due to the reduced trading time. It is a myth that shorter time frames are inherently more profitable, there are daily strategies and short time strategies that work great but strategies in the daily time frames usually aim for very high gains over long periods of time reason why they may take more time to show their true profitability levels.
Broker dependency is VERY small. After using a script to remove Sunday candles (if present) daily candles show very little variation between different brokers. This means that the results of your system will be similar between brokers and the broker will be able to do very little to alter the results of your strategy since any slippage, re-quotes, etc are bound to represent only an extremely small percentage of your average profitable trade.
Always trade with the trend. Daily time frames offer you the ability to always trade with the developing trend while smaller time frames may sometimes get to into trades that temporarily go against long term trend direction. This allows you to have more peace of mind since you know that the market is moving with you. It is also true that most successful traders and market movers also use the daily time frame to do their trading so since you are using and looking at what professionals are actually looking at your chances of success are increased.
Stress-free trading. Maybe not entirely but the daily time frames allow you to trade a system and not worry about how it is doing every second. When entering trades on higher time frames small movements are not very significant and therefore you can just set your trade and leave it with confidence that the possibility of something bad ruining it is small. Weekend gaps will most of the time not be a problem since your trading targets will always be very large and the small indecisive days and "blurry" short term charts will not be something you will need to concern yourself with.
Of course there are a few reasons why almost no new traders use daily charts particularly because of their desire to stay within the market a lot and their impatience to get profitable results. Certainly long term trading systems on daily charts are not so glamorous or fancy but they offer easy-to-evaluate trading setups and easy to understand logic that can be applied with confidence when adequate evaluation with profit and worst case scenario targets is achieved. With daily time frame systems this is especially important to do since these systems can usually have long and deep draw down periods that can last several years (alike some short term trading systems) but overall their profitability levels end up being similar to those of short term trading systems.
So in summary I believe that every trader should do at least a few years of trading with a daily time frame based systems at least in parallel with his regular trading activities (if they don't involve this already), just a few minutes everyday, sound robust trading techniques and long term results are some of the great reasons why the use of this time frame has paved the way towards the success of many new forex traders. Certainly you can be the next one :o).
If you would like to learn more about evaluating strategies by programming them into the MQL4 language to get accurate profit and draw down targets please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !
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1 comment:
Another advantage Daniel for daily bars is that backtesting which relies only on daily open+close rates, takes a fraction of the time required to backtest using full data. This really helps in developing daily strategies.
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