This article covers the various forex charts timeframes you can make use of to determine the most suitable entry and exit points in your trades.
Making use of multiple timeframe forex charts is a good method for you to assess charts and develop a suitable forex trading strategy.
What is Multiple Analysis?
This method of analysis monitors certain currency pairs over specific time periods. There is no limitation to the number of periods you view or the compressions you choose, but there are specific guidelines you have to follow for accuracy.
You should make use of a minimum of three periods to find adequate data. If you make use of fewer than three periods, you are at risk of losing important data, and making use of more than the three periods minimum will provide you with too much data. The choice of frequencies should be based on a simple strategy, such as the ‘rule of four’. This means you should choose a medium period of time that is inclusive of the standard length of time that the average price has remained steady. Once that has been determined, you should go for a shorter timeframe which is equal to 25% of the intermediate portion. An example of this is that you could choose a 15-minute chart to use as the short term timeframe and an hourly chart for the mid-term frame. By using a calculation that is similar, you should opt for a long-term frame which has to be at least 4 times longer than your medium frame. This means that you should make use of a four-hour chart if you wish to calculate the 3 time periods that have been chosen.
It is very important that you make a suitable time period selection when you choose your three periods. Long-term traders would find a 15-minute, hour, or four-hour combination of no use to them. Day traders could make use of daily, weekly or monthly combinations as it would better suit their trading plans.
The long-term frames are used to establish the main trend. This forex chart is not suitable for entry into trades as the data is too broad. If you decide to enter a trade at this point, you should do so with the trend. If you were to enter counter-trend trades, you may experience a reduced level of success, as well as a reduced profit margin.
Fundamental analysis will be extremely important to you if you choose to trade by using a long-term frame based on daily, monthly or weekly time periods. This means that if you intend following this longer timeframe, it will be necessary for you to watch the trends in the wider economy, such as consumer spending, current account deficits and business investment. The indicators mentioned are not prone to constant change, but it is a good idea to keep up to date with any movements. It is also important to monitor any decisions regarding interest rates.
Medium timeframes are the most versatile of the three time periods. You can obtain a view of both the long term and the short term frames from this particular timeframe.
Forex Charts Short Term Timeframe
Shorter timeframes will offer you opportune entry points for your trades. Forex charts linked to this time frame may also be affected by forex news.
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