Effectiveness of the Forex signals in timeframes

Successful Forex traders use a variety of systems and methods of analysis in their trading. They are different in the level of risk, profit potential, statistical quantities, etc. To build effective trading strategies, a trader must first determine his trading style. If a trader is inclined to be active, he can use intraday minute charts. If a trader is inclined to skip relatively large drawdowns and take big moves, he should trade in schedules within a period of more than one day.

Effectiveness of the Forex signals in timeframes

Dependence between signals and schedule

There is a direct link between schedules and trading signals effectiveness. For example, it would be wrong to define the trend on the basis of intraday price information, since data from these graphs is mostly disinformation (especially in Forex.) Respectively, technical chart signals of a less than one-day period are unreliable. The best solution to the problem of graph selection for trading, scalping, and investment style is multi-graphs.

Forex signals on the multi-graphs

Advantage of this system is that a trader has a trading plan before entering the market. He knows the current market trends, a trading strategy (buy or sell), volatility, volumes, and the other technical data). A trader uses multiple graphs, namely graphs of intraday period, daily period, and period of more than one day. In daily and longer graphs, a trader determines his trading strategy, potential profit in this market, builds the levels, trend lines, and reads current technical picture, which gives him an idea of the underlying asset. In the intraday charts, a trader tries to understand the market balance and determine best entry point in a market (in terms of risk/profit.)

The nature for currency pairs

The next very common problem among beginning traders in Forex market is understanding the nature of market pricing for currency pairs. All trading decisions are purely mechanical and committed without understanding of the internal causes. Such traders perform a number of transactions, but when the market changes (a sharp increase in volatility can change the current behavior of the market), they lose their previously earned money because of inability to adapt to the changing market conditions. For adaptation, any trader first needs to understand what to do in case of changes in the main characteristics of this market (e.g. liquidity, volatility, etc.).

How signals are useful in Forex

Understanding of Forex market means analyzing the actions of market participants in terms of technical analysis. Charts currency pairs or stocks are akin to the psychological picture of the market. In general, there are two main barriers – greed and fear. The purpose of any trader is making profit and identification of price levels to take a position with optimal risks and volume.  In aftermath, strong movement is expected since signals help trader in Forex. Thus, there has to be imbalance for a strong movement in normal market conditions, but not every imbalance can form a strong movement.

A strong movement occurs in case of panic or rush. For instance, EUR/USD pair was under severe pressure of small speculators, which expected them to reach parity, but EUR suddenly grew in 2015. For any rate appreciation, market needs big money. Ironically, market gets great amount of money when all uninformed traders sell. This is the main signal.

Big money is often much smarter than ordinary speculators. Under certain conditions, they may influence price movement, which violates the principle of a competitive market. When the price goes against the majority of traders, they opt out of a deal and thereby speed up the movement reducing an effective timeframe. Emotions and fears are the driving force behind any strong price movements in the market, and, a trader is able to understand the market with these concepts in mind.

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