Weekly and Monthly TF trading - Wow!

Actually, I think that the higher timeframe are effective because

1) They reflect the real macroeconomics of the currency
2) Traders have not much impact on them but the big central banks
3) They hold their trends for a long period. So if you find the trend then you could profit. The amount of chaotic movements are minimal.

Any way, for chartist like me reasons do not matter.For example, look at this chart. In a period of 8 years, E/U had only 9 Reversal. So anyone that took the reversals and trade them correctly would be making mucho dinero.

So a very easy trade right now is to sell Euros but eye on the 1.700 support area.

Thats a great monthly chart ! Only 9 trades in 8 years.

I don't mean to offend you, but, you trade longer TF's because you can't trade intra day?
More profitable? no way, a good intra day trader will always make more money.
If you have found a way to make money without burning your eyes in front of the computer screen, then I'm happy for you, but you will never be as profitable as a good intra day trader as you simply will be missing too much of the picture.
I use part of the "structure" you are using, only i'm in a lot earlier and have exited long before most of that profit has disappeared.
Good luck in your journey.

There's another face to the coin : one of the most important factor in intraday trading is the power of compounding. You'll likely miss more moves doing intraday trading compounding will make up for the difference and more.

If you are looking to enter a monthly trend, you need to look at all charts together so you can time your entry.

If possible you want to time your entry as close to a high point or low point as possible.

What I mean is, for example, say you are looking at a monthly chart, and hope to enter a monthly trend, and the monthly chart you are currently looking at is in a obvious bearish downtrend which not only has been going on for some time, but may possibly last for several months or years to come. If you haphazadly enter a sell order right away (unless you are lucky and enter at the top of the wick at the highest point for the month) you better hope you have huge funding in your account (unless you enter with a cost of a penny per pip).

The reason is, even though you enter a sell order for the downtrend that has already been going down (bearish) for several months or years, and shows no signs of reversal or going up (bullish), the month you entered (it only shows up as 1 candlestick on the monthly chart) might still spike to a huge high, and can even spike up 1000 pips higher (the upper wick on the candle stick) then your entry, before continuing its general downward trend. You might get margin called before that, or stopped out before you get any where (unless you have a $50,000 + deposit in your account and are only going for $10 per pip instead of $100 or $1000 per pip).

But if you look at the other time frames (weekly, daily, 4 hourly, hourly, 15 minutes, 5 minutes, 1 minute)., and do some research, you might be able to almost pinpoint the very minute and day of the month when there will be a high peak for that month, and then you enter your sell order (enter at the top of the wick, or near it, so to speak), and then you won't have much worries that you will be margin called or stopped out for the remainder of the month or the following months (if there are not any strange market spikes). (If there are several months in a downtrend and there is currently a lower low it is ideal to enter at the top of the lower low).

And the following month might start with a candlestick lower then the month you entered....and then from there as the downward trend continues, each month has its highs and lows, but hopfully you are high enough that you have no worries possibly for many years depending upon how long the trend lasts.

Some trends last many years.

For example the EUR/USD began a uptrend around October 2000, and peaked out in July 2008.

If you were fortunate enough to enter at the right time in October 2000 little did you know you would have been safe, and in +pips for the next 8 years - ending in a almost 7600 pip gain (seems very small and wrong, but that is what my MT4 pip measuring tool said when I measured the pips from point A in October 2000 to point B in July 2008).

That said, who would want to be in a trend for 8 years unable to use the money they are making since they have not yet closed the order? And if you entered with only $1 per pip, then after 8 years you finally get access to your $7600 if you are still around. If you put in $10 per pip you would get $76,000 after 8 years. But who has the patience to wait that long since life is so short and you don't know if you will be here tomorrow. But that is another subject.

How to Make the long-term movement in currencies. Select currency. 1. Budget deficit / surplus (as a percentage of GDP 2. Current account (as a percentage of GDP). Hold input. 1. Interest (low interest rates are counted as positive) 2.M3 (high values of positive number). Without commodity economies . Small economies are recommended only if they are nearby (EUR / CHF). The system does not take a political risk.

- Larger in terms of pips, but what we risk per pip will vary greatly. A scalper will certainly risk far more per pip than someone who trades the weekly.

- The scalper might make a few hundred breakout trades before the slow trader makes their first. The trader on the slower timeframe might trade with a larger edge, but they will have far fewer opportunities. The tradable range is always larger on faster timeframes. Someone who trades the 15m may see Himalayahs, while someone trading the daily may just see an upbar.

- The trader on the faster timeframe actually gets far larger moves.. A decent breakout on the weekly may appear as a massive, massive breakout on a faster timeframe. The faster trader may catch a similar amount of pips as the slower trader.

Note that I'm not suggesting faster timeframes are superior.

Whoa, hold on, trading less and making more? Your broker's going to hate you!

Well done.

What about the two-year TF?

And what sort of stop size are we talk'in here?

I found this:

(As far as I can tell, the "flying buddha's" are not to be taken literally)....

http://www.forexfactory.com/showthre...45149&page=103

"Hello, Here are 2 yearly charts. True they aren't different from 5 min. ones, with some flying buddha's failing but the succeeding ones growing into huge legs."

http://cdn.forexfactory.com/attachme...1&d=1282943710 http://cdn.forexfactory.com/attachme...1&d=1282943710

I think the spread is a major reason why long term trading may be easier. If you're goal is 15 pips and the spread is 3 thats an extra 20%* of negative expectancy on top of what was probably 50% to begin with.
Essentially, the higher the time frame -> the larger your profit goals -> the better your expectancy -> the smaller of an edge you need to be profitable.


*OK 20% is a guess but the point is that there exists a direct relationship between the size of your position and the expectancy of your trade due to the spread.

if we use daily and weekly charts for trading, do we need the news badly like trading from 15 min and 1, 4 hrly charts?

my opinion is no... how about you??

News are effective only at the time of release and perhaps a few hours later. If you trade the daily and weekly time frame, effect of news will be minimal or none at all.

What are the drawdown experienced using Higher time frames. And how wide the stop if one is trading on a montly bar?

I know this is an old thread but pertinent to what I am doing right now. The answer to the above is that your drawdown doesn't necessarily need to be that high if you enter on the lower timeframes when the daily starts trending in the direction of the monthly. If you can get 4 or 5 good entries to break even and then just hold them until the monthly turns then you'll be happy with your gains.

I don't think most people have the wallet or patience to just take a trade on a monthly chart and stick a 1000 or 2000 pip stop loss on it. Why not risk 100 or 200 pips on a daily or 4 hour entry and if the trend continues without coming back to your entry point for 6 months you'll be quids in.

It seems to me daily charts close is more reliable than intraday charts close because the close on intraday charts is arbitrary. 1hr charts close every hour but that hour isn't of particular importance for the market. 15 min charts close every 15 minutes but what does that time mean for the market? It means nothing. 4hr charts close at random times at different brokers and even if they would close at the same time it still doesn't mean anything to the market unless it concides with a market close.

On the other hand a daily chart with a New York close means the close of the price is after the London session and the New York session closed (these are the most important sessions). Some brokers have close at 0 GMT but I don't see any logic in this, the market doesn't care it's 0 GMT. Some use 0 New York time (Oanda I think) but the market doesn't care if in New York it's 0 or not. The only logical times for a close is the end of a session. Asia session isn't very important so a more important close would be the close of London or New York. I don't know any broker that uses London close (and why use London close if New York is still open) so the most logical time for daily charts is the New York close. This may mean that a daily chart is more reliable than an intraday chart with a random close at a random time.

I have a question about very high time frames like weekly and monthly and the efficient market theory. I don't believe this theory is true on lower time frames but on higher time frames isn't the price very close to the intrinsic value? Which means the price is fair not overvalued or undervalued. Which means you can't make profits over the long run and you can't have an edge. Sometimes this isn't true otherwise we won't have stock market crash but maybe most of the time it is true (price is very close to the intrinsic value on very high time frames).

@baron193: an intraday trader will make more money than a higher time frame trader if they trade the same markets and have the same money and skill but if that intraday trader only trades forex and the high time frame trader founds a lot of stocks to trade this isn't necessarily true.

i wish everybody would just look at monthly charts.even if its a few times a month. i think the world would be full of very happy forex traders

The lower time frames never gave me overall profit. I'd win some and I'd lose some.

That was most likely due to user error but I just couldn't seem to make enough on lower time frame movements. 10 pips here, 50 pips there, then a loss of 10, loss of 10, loss of 10. I was waking up and trading these crazy early morning hours just to hopefully grab the high or low of the day and make some pips.

It just didn't seem to work.

Just started working on the weeklys and they look promising.

In any bounded complex system scale is important. For unbounded systems where scale can be of infinite extent in either direction, then scale becomes irrelevant. However this is not the case with the markets.

In any financial market, the system is bounded asymmetrically with the lowest end of the scale being the tick or individual trade. The other end of the scale is theoretically unbounded. In these instances the scale applied to the system does matter.

As scale increases, the sample of participant actions increases thereby the resultant price action becomes more indicative of the population as a whole. On shorter term timeframes, the participant behaviour becomes less representative of the population and more representative of a sample class of the population (eg. speculators, scalpers, HFT traders etc.) and hence reflective of the behavior of a distinct class of trader.

The choice of timeframe to apply is an important choice when determining whether to apply a momentum based (eg. trend following) or mean reversion based trading strategy. For example, where serial correlation becomes important, the longer timeframe gives a greater chance of being able to discern price moves associated with underlying economic drivers as opposed to simply random directional price moves. In the longer term, serial correlation influences of macro economic nature become more pronounced. The longer you expand your timeframe the less 'noise' is observed against the overall trend of price action.

Think of it this way. A 10 pip move is not sufficient enough to influence a large number of market participants to take action. The 10 pip move however may be useful for a scalper however who represents only a very small proportion of the entire market population. On the other hand a 1000 pip move observed on a longer timeframe is likely to involve the actions of a far greater proportion of the market population such as speculators, investors, risk managers, financial intermediaries etc. It is the summation of the behaviors of the population which result in the longer term price action.

While economic factors driving the macro trend always appear obvious in hindsight and are liked to macro factors, the price action behaviour on the shorter term timeframes do not clearly convey these long term biases in price action and the short term price action is often shrouded in price action that is not important to the overall long term price action. It is therefore seen as 'noise' in relation to this long term price movement with a shrouded subtle bias of macroeconomic drivers hidden amongst this 'noise'.

Your choice of strategy matters in relation to the timeframe you are applying. For trend traders or global macro traders, the better results can generally be observed towards the longer term timeframes. Economics is reflected in the longer timeframes and is only evident when summating millions of participant behaviors over the course of time. The process of constructive and destructive interference of these behaviors over a large sample size results in an overall bias in price action that is more reflective of global macro factors.

Another important reason for improved performance for momentum traders using longer timeframes is that 'over trading' and the costs of trading are reduced in taking the longer term timeframes. Of course for those traders that use leverage, the costs associated with holding costs increase with the greater timeframes but in general the majority of traders who navigate the long timeframes do not apply leverage to any great degree.

While trades are fewer and farther between on the longer term timeframe, to increase trade frequency it is therefore essential to diversify your trade activity across a large range of liquid instruments. This therefore avoids the reduced trade frequency associated with longer timeframes. So in general the shorter term trader may focus on a single instrument whereas the longer timeframe traders will most often trade across a diversified portfolio.

For those traders that like to be right more often than not, then mean reversion trade activities are more suited to the shorter timeframes and relate to trade behaviours of traders as opposed to risk managers or investors. These behaviour are more repeatable and observable on the shorter timeframes. Out in the longer timeframes, mean reversion is of lesser significance and certainly not of the trade frequency required to trade a single instrument.

Since 2008 central bank intervention and HFT have had a significant impact on price behaviour where regular intervention practices have a greater ability to influence small movements in price in the short term. That is why mean reversion strategies have been so successful since this date. What this does however is to serve to heighten the disequilibrium of the market from it's fundamental economic drivers. The result will see more frequent mass disruptions to the market with increasing ferocity punctuated by long periods of mean reversion.

This is therefore making the trend trader have to progressively go further out in timeframe to achieve alpha. We are seeing this in the trend following CTA's in the industry. We are also seeing the CTA's diversify their system portfolio's to include mean reversion systems to assist in flattening out the equity curves and improve cashflow returns.

Price action/chart patterns/candle sticks are fractal in nature.

You will need lots of chart time to discern your edge.

In fact the lower time frames provide more opportunities to practice reading/trading the markets compared to the larger time frames.

Flipping through the daily, 4 hour, 1 hour, 30 min, 15 min, 5 min, and 1 min will give you conflicting signals at best.