How To Pick The Right Forex Technical Analysis Timeframe.

How do you actually choose the right Forex Technical Analysis Timeframe?

Or, better yet, is there’re such a thing as “the right forex technical analysis timeframe?”

Well, this is another very in demand topic, and Francis Hunt spills the beans on the subject:

“Yes, timeframes are good question and something that it’s in terms of  my strategy. I’ve come and found my own truths, so I’ll share that… As I trade trend, with the Trend, I don’t look to pick reversals, because often reversals have lowest success rate and don’t turn out to be reversals. In other words, going back to that Isaac Newton and Einstien type philosophies – things continue to move generally, and they are moving for a reason.

So, on the basis of a trend continues pattern, or continuation, I have a trend-time view and then have a pattern-view. Where I’m looking at the setup – the squeezing of the Volatility; it’s stopped going up for a while, it’s resting. And then I have a trigger-timeframe which will be a time frame where you actually looking for the specifics of the Market to get your unique high 3 point, and when the breakout is going to happen. So, that is very focused on timing. Which direction the river is flowing? Where is South, you know, – the downstream? Get that right, that’s your Macro timeframe.

Typically, the best times the patterns are taking – on the larger timeframes. They are more consistent, broadly you are less likely to be flicked out, particularly if you are in Forex. Variety of other underlying markets can be a little bit choppy at times. I would say, you want a trend-timeframe, which is may be a Daily chart, can even be Weekly, or Monthly to H4-(the four hours). Your pattern-timeframe, is where you’re looking specifically at the setup and identifying the aspects of it…and I’m talking about the symmetrical triangle; your three highs and three lows, the pinch, that would be one quarter of their half.

A man with magnifying glass looking for forex technical analysis timeframe.So, if you are on Daily, your trend-timeframe, I would be on my pattern-view, the four-hour. And then when I’m looking at that third high and third low and the move that takes it through the high 3, that reasserts the bull-trend. That would be my trigger and timing timeframe. I want to really pick that third high and get that stop neatly nailed.

 

And the point that I entered with the pending order, note also, that is a pending order. In other words, market must take you in. This actually eliminates a lot of bad calls, because if it breaks down and it is a reversal instead – you don’t get taken in. Most people are getting in market orders, they say: “Oh, I must be in, the markets are moving.” And they jump, they are momentum chasers…by a default. Because, you want to be excited, it’s going up, you want to be a part of it – you chase the train.

A pending order is more about price level falling, than a specific moment in time that you want to be in the market. So, that trigger timeframe would be a quarter of four-hour (H4). You would have Daily – trend. You would have four-hour – pattern, and you would have one-hour (H1) for capturing that final, third high and third low. Which represents the breakout and the stop-loss placement. Bang!…those are my three timeframes. So, I’m actually looking at three. The first one, once you’ve got that right – it’s nailed, you can set aside. Then you concentrate on the other two.

Hmm…yeah, that is intensive…so, how many markets you follow?

It’s driven by finding the specific setup, so, I tend to be interested, once there is a chart that has had a strong Trend, that is in continuation pattern and has already given me my first pull back and the second bounce. And the second pullback that is not as low. It is already given me two clear impulses and it’s tightening. Then I start to say: “Ok, this is looking interesting.” That becomes just a watch list candidate and depending on how it’s progressing, as long as, it continues to comply, we become more and more interested in it. And as we start getting to the third high and the third low we’re focusing on the trigger time-frame. “So, how many markets?” – I don’t have a number, I don’t say – 10. Anything that I can find, and I have number of scanning tools where I can find a liquid market that is giving me circumstances, is potentially interesting.

Ok, lets talk about predicting price direction and its importance in Your trading style.

An image of a logo that explains forex technical analysis timeframe.So, direction…As I’ve probably eluded to; we are continuation orientated, broadly speaking. We’re buying the Trend that is already apparent. If it shows us that is ready to reassert again to the upside, so it has to be self-confirmatory as well, by virtue of its continuation. I keep my direction very, very simple. We believe, the original direction is correct until such times that is proven to be incorrect.

I apply, what I call, a summative theory; we continue to keep on believing – you’re moving up, as long as, you keep showing that that’s what you’ve been doing.

In other words, once again, referring it almost to that object in space that is moving…it will continue to move, until such times as some new element enters into the market, in space, that pushes it in another direction. And as you’ve noticed, with our solar system, and all of this things, we are continuing to move for a long, long time.

And only when we get hammered by one huge star, or asteroid are we going to seize to moving that way. It’s been highly predictable for many, many years and if we get Astronomical, you can say, it’ll probably be the case of our entire lifetime and many people’s lifetime before and after us.

Also read: How To Use Solid Forex Trading Tips That Improve Your Trading

For me, that makes logical sense for a Trend. Market is re-valuing, say in Equity, or Commodity, or even in Fx pair. What happens is that, we are not a fruit-fly. You don’t go from one point, an event, and suddenly all the information becomes Universally available to all the people, and that fruit-fly jumps from here to there.

The way the market responds, is you have to cope with peoples expectations and re-rating of value and it takes a while, over time, for people to see someone in new light, or re-value the company in a new light. This is, what is the birth sign of Equities. After doing it quite a lot, fairly briskly for awhile, it will pause in that process. In the same way as you climb the steps; you go up – you flatline, you go up – you flatline. I’m exploiting that.

This is like, common sense…

– To me, it’s feels like a logician’s way.

When You talk about it like that, it’s not better than very basics. Isn’t it?

Yes, but you’ll be amazed how many people, when teaching, that are always trying to sell something that is going up, and always trying to by something that is making new lows. I’ve never understood – why? It’s almost like saying: “Can I swim upstream to the top of the mountain?” And I’d say: “Well, go down, to the beach, see who gets there first?”

What’s most important part of your strategy during a regular day, you know?

What’s Your number one thing?

I think, Analysis – not the actual trading. The amount of work and drawing you do on your charts, pre-actually taking in, is what gives you the confidence. I’ve always found, I’m most confident on a trade, when I really opened the chart up. Historically, I’ve looked to see how it’s performed, how is it continued before, drawn the patterns, projected the targets  –

where they were made, thrown all my key levels of significance through the chart.

Seeing: it’s come back, visited, supported, moved back up. Really got inside the price behavior that I feel. I understand this animal, you know. You wouldn’t start committing surgery on a being that you’ve never studied before. Why would you start trading something that you have not, properly, got under the skin of?

What are some of the advantages of following a tested strategy, aside from, a better opportunity to win?

So…tested strategies, and I’m assuming you talk about something that is systemic, where you can actually run almost ‘black-box’(algorithm), and you generate notional trades. In that instance, I’d feel the biggest advantage of a tested strategy is actually, the process of defying the strategy in a first place. Because, too many people when I’m speaking, and this is once again, the value of having taught traders.

They say: “Here all my rules…” And then, when I watch how they implement them, they actually say: “Well, I did not do that one, because of that, and I didn’t do this one…” So, I said: “Where is that as part of your rules, though?” You actually, discretionally, bending the bernicial rules that you wrote down. Which, you not actually trading your system in terms of how you’ve  defined it, or you actually adding a new level of rules that you have not yet incorporated in your rules.

A sign that explains how forex technical analysis timeframe works.So, one, or two is going to happen; you really going to stop messing with what you’ve originally wrote down and trade what you’ve defined, or that what you think is important criteria – define that criteria and integrate into your system. What you actually find, is you start being forced to make decisions about what you really want. You can’t get in life what you want until you define it and could write it down.

The same way in Trading, you have to say: “I’m going to let some of those trading patterns go. I quite like them, but sometimes they really sting you. They go the wrong way and when they do that, it could be good, but it could be bad. Let’s just focus on the ones that give me the results that I always need.” And you’ve been forced to eliminate, and to define.

That process of defining the system is most valuable part for me. The testing, then, gives you the outcomes of that work and tells you if you basing your thinking on a failed fallacy, or not. If you can’t make over a long run reasonable return on testing, you will never make it in reality on that. The testing is a clear point of where your idea is “put to the sword,” if not justifiable. And then, you are living in a false paradise, so you must come up with another system, but at least it gives you closure. You can let it go.” – Francis Hunt

 

What Forex  Technical Analysis Timeframe  do you use in your trading?

Please let us know by commenting below…

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How To Use Solid Forex Trading Tips That Improve Your Trading

Here is another fantastic article on 3 Solid Forex Trading Tips that will, actually, make You a better Trader.

Read on, and comment later.

“Three key things that will absolutely metamorphosize your trading. Now, I don’t know what trading strategy you are implementing, if you have one at all, whether it’s written down, what your approaches are? Many of you heard a little bit about maybe the HVF method I’m not trying to swing you onto that, you might have your approach. I know how it is, when I was getting to that intermediate phase, I started to harden up on that. I wasn’t ready to listen to other people’s new methods. I was just looking at tweaking and refining…

Maybe you somewhere sitting in that stage: “I’ve got my my posture, which is all mapped out. This is how I’m going to do it, but I’m open to, you know, a couple of tweaks and a couple of points.

So, here they come in chronological order – there’s three things that will make you substantially a better trader if you implement them. That’s only “if” that’s with them.

 

Number one:

Image of the slow down sign representing solid forex trading tips.

Reduce the number of trades you place. Reduce the number of trades you place, so if you someone who does 30 trades a month in an hour, round trips approximately…obviously it can vary.

I’m saying to do – 10. Lose two-thirds of that which you do! Now, this is shocking and most of you are going to battle to do this; might do it, try it for a day, and your psychology and everything will work against you. And just doing this, number one, will prove exceedingly difficult. If you’ve been trading for any number of years, or even just four months, – you already have a pattern that you’ve developed.

It won’t feel like work – sitting there and doing nothing. What happens when you only do 10 trades instead of 30? Well, if it was 30 a week and you do 10, it feels like you’re working a lot less. You feel bored and you lack the patience. So, this will develop your patience.

You have more time, and  one of the best things that should happen, is you become more selective. And the minute you become more selective…and you only need those “little prisoners” on the back of the wall: stripes, that you then draw a line through after you’ve drawn four – you draw a line to, and you’ve had done five of your five trades. You get a whole bunch more selective about them and that means – better quality. So, you put more work in, per trade, on the pre-trade arrangements then you did before, when you were doing 30, where you are just tactical and executing in and out.

Woman's hand in the shop that is focusing on solid forex trading tips.

The best part of trading, where the work is really done, is the amount of work we do pre-trade in the analysis, so cut your trades! Number one – cut your trades by 66% in number. Know how many trades you do in a month.

So, go find that out. Take an average over the last three months, six months, or however long you might have been trading and then, reduce it by 66 percent. That is going to prove exceedingly difficult. It’s going to test your patience, but what you should fill your time up with, is doing more technical research pre-trade, and being far more selective.

That’s point number one. This will improve you immensely. It’s not volume of trades that makes you wealthy…You’ll usually find, when I do P&L (Profit & Loss) analysis with traders, that it’s actually one or two key trades that they’ve done that have contributed 40% sometimes 60% that they’ve mined of all their results, so we stand very narrow on our winners.

Also read: How Others Are Using Trend Following Trading Strategies?

Point number two:

Stop putting market orders on. Stop placing market, at market orders. Every entry is to be a pending order entry, whereby you may or may not even be present when it is executed on your behalf. So, for number two – stop placing market orders. Rarely, very-very, rarely is “now” “right now,” – the key moment. Very rarely is “right now” that key moment. If you’re dropping down the timeframes and you’re watching and you’re getting hyper adrenalized by the tick – that’s more active, because you slip down the timeframe and say: “ That’s it! It’s taken off now! Chase! Jump, jump, jump!”

We are all inherent momentum chasers, and we’re waiting for the confirmation of that big move that we wait. And then you see a couple of flicks of a tick, which three times go on the upside; instead of one-up, one-down. And you think – that’s it, it’s the beginning of the move.

A dog that is playing the ball and enjoing solid forex trading tips

Rarely is “now” that moment. What do you do? You go up the time frames, you do all your pre- trade trend (everything else) analysis. You do all your key-levels of significance analysis, as I’ve referred to before, what are the key levels that the market has shown that it is respected? And on the take out of it – you had breakout trading.

And even if you’re not, if you’re trading in another sense on a certain event, you must have the “if”statement. “If” this level run, then buy or sell, or whatever the case may be. Now, if you do this, this means – many of your entries you may not even be present for, or you may not be observing at, but the reason for entry will be far stronger. Combining that with “point number one” will make it much easier.

Because, you now have something you have to look for and work to do to fill the time up now, that you’re only doing one third of the amount of trades you’re previously doing. Every entry is a pending entry! Do yourself a favor and count your profitability and your performance on your at-market-order trading versus your pending-order trading. You will be shocked to see which one is the key ones that turn out to be good things for you.

So, we’ve had “number one” with our “number two.” What is, “point number three?”

Point number three: 

Point number three ties into many aspects of what I fundamentally believe in, – have a target! Do not exit on a trailing stop. That is a sub-optimal exit on the market moving adversely against you. Have a target, make yourself available for good fortune events, by having an order above the price action, if you’re going long and one well below the price action, if you’ve gotten short.

What does giving you a target do? It allows you to calculate, before entry, because you’re using a pending entry, your full reward to risk ratio.You will know before you are even triggered, what your best outcome is in the event of a successful trade and how much you’re risking, because you will place your stop-contingent on your pending order.

 

Image of a Dart board representing a solid forex trading tips.

So, when you place your pending order, as per “point number two,” you will also have a contingent stop-loss and a contingent-target. Every time have a target. Every time, into on a pending order. Know your reward to risk ratio in advance of every trade. By the way, this also makes you available for positive slippage. Which is, when the market can skip very strongly in your favor.

It may even gap over your target – a gift that I’ve received more often than most people will imagine. It also means, you spend less time in the market then if you exit on a stop loss, and your line of efficiency – the gradient from your entry point to your exit, is its steepest.

So, the triangle geometry that you get on your line of efficiency…This is HVF (methodology-phraseology) – forget it if it means nothing to you. But the line of efficiency, is the point at which you entered to, when you exit. You want that line to be as steep as possible if you’re up (if you’re long), or as steep as possible to the downside, when you’re short. Minimum amount of time in the market – maximum amount of gain.

Our methodology is the only one that measures risk reward ratio divided by time. That’s the ultimate efficiency; how much juice against, how much did you risk, and how quickly was it attained. Every time you’re in the market, you are on Risk.

Okay folks, there they go – quick recap:

Point number one – cut your trades by 66% to one-third of the current amount of trading you’re doing. You’re going to be doing way more work on each individual trade. That’s how you’re going to fill up the time you’re making available.

For number two – pending order entries. No market order entries. “Now” is rarely the key moment. And with that pending-order you will also have “point number three.”

Point number three – your pending-stop and the pending-target, always have a target. Stick to the target, let it be run, forget what happens after that. You sign the contract for a great set of return. You will know your risk/reward and you are content for getting out on that target, and getting delivered that which you are. Remember, you’ve got to leave a little bit in, so that there’s someone else to take over your trade. And a reason, for them (market makers) to buy as you are selling out your longs, or vice-versa, to sell as you’re buying back your shorts.

Okay guys there’s your three points. I hope you found that useful…” – Francis Hunt.

 

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