Monday, April 24, 2017

Forex Technical Analysis on Higher Time Frame

July 10, 2012 by  
Filed under Forex FAQ & Latest Post


In this forex faq, we have a question from one of our fellow traders asking the below question

How can I trade a small time frame for 2 hours on the afternoon, UK time, without losing every time I place a trade? How far should I go on a bigger time frame in order to trade the smaller one?

This is a good question that I am very happy to answer for you. In fact, for all of you who are reading this article now, you should pay special attention to it.

So let me answer the first question on how to trade without losing every time you place a trade.

This can only be achieved if you have a good trading strategy on hand. In addition, you must also be good at executing it as well. Some of you may think that having a good strategy is all it takes, but you may wonder why there are people who are not making money while others are making money even when they are using the same strategy.

This is because of your execution. As a trader, we must always practice what we have learned on a demo account until we are able to execute it properly before moving to trade live. However I must first informed you that there is no strategy that wins 100% of the time.

What you should be looking for is a strategy with good winning percentage and decent risk reward ratio and you will be able to make money in trading even if you have only 2 hours on the afternoon, UK time.

As for your second question, below is my advice to you.

When we are trading, we must have a good overall picture of the market at that moment. This is usually done by analyzing the higher time frame of the currency pair that you are trading.

Let says that I am using the 15 minutes chart to trade; I will usually do a top down analysis from the higher time frame down to the lower time frame. In this instance, I will first take a look at the daily chart to have a feel of the market movement. (E.g. whether it is in a strong uptrend or it is moving sideways)

You have to know that the candles on the 15 minutes chart is what eventually makes the hourly, 4 hourly and daily candle. One hourly candle consists of four 15 minutes candles. One 4 hourly candle consists of 4 hourly candles.

Therefore when you think that the price is going to reverse on the 15 minutes chart. It may be just a small retracement on the hourly or 4 hourly chart.

My personal advice is for you to start analyzing the trend on the daily chart, 4 hourly and hourly chart. Once you establish the trend, you will then identify all the important level of support and resistance on the hourly chart.

Then you move down to the 15 minutes chart to look for a good entry.

For example:

You are seeing a strong uptrend on the daily, 4 hourly and hourly charts. On the 15 minutes chart, the price is starting to move down.

If you have established your trend on the higher time frames, you will now know that the movement on the 15 minutes chart is only a retracement and not really a reversal.

You can then wait for the price to hit a major support and then enter a LONG trade to ride the uptrend on the higher time frame. For those of them who did not do a proper technical analysis on the higher time frame, they may enter a SHORT trade thinking that the price is going to reverse.

I hope that you guys find this article useful for your trading and start to do technical analysis on the higher time frame from today onwards.


Comments

5 Responses to “Forex Technical Analysis on Higher Time Frame”
  1. Dane Nas says:

    Hi Kelvin.

    Thanks a lot for your very nice sharing. I have tried to execute trade via demo account using top down analysis technique form 4 hours chart, i hour chart 30 minutes and 15 minutes chart but I still confuse about when to enter trade. Hopefully you don’t mind to give trade example on that. I’m using 15 minutes chart to entry. TQ

  2. ajose says:

    Sir I really need your advice on how to trade 200Ema on Higher time frame and lower time frame when the higher time frame 200EMA is different from lower time frame.Example on Daily,

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