Forget About Finding the ďPerfectĒ Trading Strategy (Do This Instead)
Want to find a Forex trading strategy that works?
Sure you do. Otherwise, you wouldnít be here reading this. But unfortunately, most Forex traders are looking in all the wrong places.
In fact, if you arenít doing this one very simple thing you are making your life much harder than it has to be.
What is it, you ask?
Trading from the daily time frame. Thatís it. No moving average crossovers or MACD combination in existence can rival its effectiveness.
By making this one simple change, you drastically increase your odds of success. And in a business where probabilities are the name of the game, increasing your odds should be your top priority.
Now, this doesnít mean you donít need to have a viable trading strategy to succeed because you do.
But if youíve been struggling to trade from the intraday charts, what Iím about to show you might just be the missing piece to the puzzle.
By the time you finish reading this post, youíll know why I use the daily charts and also understand the advantages and disadvantages of doing so. Weíll even discuss what three well-known fund managers can teach us about the daily time frame.
Advantages and Disadvantages of the Daily Chart
Like all things when it comes to Forex trading there are advantages and disadvantages to utilizing the daily chart.
But I think youíll quickly find that the alleged disadvantages below are actually ďhiddenĒ advantages.
Weíll get into that shortly but first, letís take a look at how this time frame can improve your tradingÖ
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Now for some alleged disadvantages:
- It doesnít provide as many trade setups compared to something like the 15-minute chart
- The trading capital required to trade such a high time frame is considerable
- There is more risk due to the need for a wider stop loss
- Itís slow and boring
But are these true and are they really disadvantages?
Having utilized the daily time frame since 2010, I can tell you that all five points in the infographic above are real.
These alleged disadvantages, however, are not.
Letís run through a few of the most common objections Iíve heard when it comes to the higher time frames.
I Can't Trade the Daily Because.
I receive hundreds of emails from Forex traders every week. Many of them are questions and even objections to trading from such a high time frame.
Inspired by these emails, I decided to address the four most common objections I hear.
By the time you finish with this list, I think youíll see that what might appear to be a disadvantage is actually an advantage in disguise.
1. There arenít enough opportunities on the daily
I hear this argument all the time, but unfortunately for those making it, itís an incomplete one. This is because there is one important word missing.
What is it, you ask?
There are tons of so-called opportunities on every time frame each day. But if they arenít quality setups, they arenít worth the risk.
Anyone who has traded both lower and higher time frames will tell you that the daily is superior when it comes to quality.
2. My account is too small for the daily charts
This one simply isnít true. With the ability to trade micro lots at most Forex brokerages, the daily time frame has never been more accessible.
I have members who started with account sizes as small as a few hundred dollars who have successfully traded the daily charts.
And while each position may take longer to play out, it wonít take you longer to build a sizable trading account. In fact, you are much more likely to do so on the daily than any other time frame.
If you lose 50% of your account, it takes a gain of 100% to get back to breakeven. By choosing quality over quantity, youíre making a commitment to protect your capital which will inevitably help you build a sizable account over time.
3. A 100 pip stop loss? Thatís too much!
Iíve heard this one a lot over the years. The truth is that the distance from your entry to your stop loss is irrelevant.
You see, the only two things that matter are your risk to reward ratio and your position size.
Neither of those two things are obstructed by a 100 pip stop loss.
Everything in the world of trading is relative. So even though you may have a 100 pip stop loss, your profit target could be 200, 300 or even 400 pips away.
A wider stop loss does not equal greater risk. Nor does it negatively affect the profit potential from a given setup.
Of course, you have to vary your position size according to the specifications of each setup, but as long as you use a good Forex position size calculator, this should never be an issue.
4. The daily time frame is slow and boring
Indeed it is, and I love it!
Becoming a successful Forex trader isnít about finding the most exciting style of trading out there. As a matter of fact, if your trading isnít boring you may be doing something wrong.
Achieving consistent gains in the Forex market is about finding something that works, not something that is fast and exciting. Thatís what the casinos are for.
If you want to grow as a Forex trader you need to embrace the idea that slow and boring is a good thing.
This notion is particularly the case for those using the higher time frames. After all, there are only so many quality setups that come along each week.
But thatís okay because when youíre able to extract 4% profit or greater from a single idea, youíll no longer feel the pressure to trade more often.
Trade Like a Fund Manager
Everyone wants to have the trading capital of George Soros, Bill Lipschutz or Stanley Druckenmiller. Thatís no secret. But most Forex traders are kidding themselves.
Most who say they want to make the kind of money these guys do are still stuck on the 15-minute chart, which is the complete opposite of how all three of these guys trade.
Even if you are on the 1-hour chart, you are still trading in a way that is not in sync with how the big names in the business do things.
Can you imagine George Soros risking billions of dollars on a 1-hour swing trade? How about a scalp on the 15-minute chart?
It simply doesnít happen.
Of course, trading on the same time frame as the three gentlemen to the right or any other big name in the business is not the only way to do things. As Jack Schwager once said, ďthere are a million ways to make money in the marketsÖĒ.
Is it possible to make money on the 1-hour chart?
Absolutely! I trade it on occasion, and so do some members of the Daily Price Action private community.
How about the 15-minute chart?
Sure, why not? Although I donít know of a single Forex trader who can honestly say that they are consistently profitable scalping the 15-minute time frame, but that doesnít mean they donít exist.
But hereís the thingÖ
It isnít about doing what is possible; itís about doing what is probable.
While you could make consistent gains on a 15-minute chart, the odds of finding success on the daily chart is much higher.
Just take it from a few guys who know a thing or two about navigating the financial markets.
Don't Reinvent the Wheel
If it isnít broken, donít try to fix it.
Thatís the point of this entire article. If we know that most, if not all, of these billionaire market strategists base their decisions on the daily time frame or higher, why are so many still trying to use a 15-minute chart?
Is it because they believe that a lower time frame will produce more trade setups and thus more profits?
Or perhaps those who get into Forex trading feel the need to fit the image of a day trader, so they opt for a lower time frame to emulate that fast and furious style of trading.
Regardless of why traders do it, at the end of the day itís about seeking out those who have ďbeen there, done that,Ē and then emulating their success without reinventing the wheel.
With that said, there are always exceptions to the rule.
Iím a huge advocate for finding a style that suits your personality. Everything you do in the markets must resonate with who you are as a person.
If it doesnít, youíre not reinventing the wheel; youíre spinning your wheels.
Always try to align your efforts with your passion. If you need a lower time frame to satisfy an inner calling, so be it.
But just know that the ďbig moneyĒ has always been and will continue to be on the daily charts.
I Have One Simple Question for You
Are you trading the Forex market for the excitement of the trade or to build a trading account?
Now, before you rush to answer with the latter, be sure to dig deep here. Take a few days to think about it if you have to.
Do more trades equal more excitement in your life? If youíre like most, the answer is an unequivocal yes!
Itís a hard thing to swallow, I know. Youíd love to think that youíre in it to steadily build an account, but for most that simply isnít true.
I was once where you are now. I thought I was in it for the ďrightĒ reasons.
The truth was, I was placing trades for the sheer excitement it delivered.
I loved knowing there was a chance I could make money.
What I failed to understand is that itís not about possibilities, itís about probabilities. And pulling the trigger five times a day leaves you hoping for whatís possible instead of leading you to a probable outcome.
I wanted a larger trading account, but my actions werenít in line with my desire. In essence, I was talking the talk but wasnít walking the walk.
So take a step back and figure out if you fall into this category of traders. Because once you understand why youíre placing so many trades, moving to and profiting from the daily time frame will be an easy and welcome transition.
The purpose of this article is not to dissuade you from searching for a viable trading strategy.
Finding a strategy that fits your personality as well as your lifestyle is critical to your success as a Forex trader.
However, far too many traders disregard the daily time frame when searching for a strategy that can work for them.
Most tend to think that the lower time frames will produce more setups and thus higher monthly returns.
That notion couldnít be further from the truth.
The wealthy traders of the world base their decisions on the daily time frame and higher for a reason Ė because it works. It gives them the best chance of extracting a profit from the market over an extended period.
But you donít have to be rich to trade the daily chart; quite the contrary in fact. With the availability of micro lots, anyone can trade and profit from the daily charts.
We all know that (approximately) 90% of Forex traders fail to make consistent gains. We also know, due to the various forums and chat rooms out there, that the majority of Forex traders are stuck on the 1-hour chart or lower.
A mere coincidence?
Perhaps, but what if it isnít?
I'd Love to Hear From You
If youíre still struggling on a lower time frame, I have a challenge for youÖ
Try switching to the daily time frame for one month using nothing but simple price action and report back here with your results. You might just find what youíve been searching for.
Post your results or ask a question in the comments section below. I look forward to hearing from you.
I am a newbie to Forex and started with lower timeframes. Though I started off good I was not consistent. Now I realize I have to use Daily Time Frames for consistency and your article confirms my experience.
Ė When is the best time of the day to look for a trade setup?
Ė After identifying the set ups (in Daily time frame), can we use lower time frames to enter/exit/manage the trade?
Ė What about Weekly and Monthly time frames?
Thank you Justin, once again!
I trade a New York close chart, so setups from the daily time frame materialize at 5pm EST.
It really isnít necessary to use the lower time frame with the way I teach price action trading. While it can be done, in my experience it usually hurts traders more than it helps them.
I use the weekly time frame quite often as well as the monthly, although not nearly as often as the daily or weekly time frames. The weekly is great for identifying larger patterns like the one on AUDJPY that broke down back in July Ė> https://dailypriceaction.com/daily-setup/audjpy-holding-former-channel-support
Hope that helps.
Wonderful Justin.. I been trading since 2011 without much success using Lower time frame.. Only for the past 8 months trading using Daily charts with consistent profit.Now my motto Do only Quality trades with Good Risk:Reward ratio..
Thatís great to hear! The daily charts certainly make things much easier.
Have a great weekend.
I am learning price action can you tell me all i need to focus on .
You can browse through the various topics on this site or check out the full course and community at the link below.
Let me know if you have any questions.
The way Iíve come to look at it is that the lower time frames only represent a subset of the market. You get American bars, European bars, Asian bars, etc. A pinbar may form during one session, but the next may look at things differently. With the daily timeframe, everyone around the world has had an opportunity to look at the data and every bar represents the input and consensus of the entire market.
Iím very grateful for DPA pointing me in the right direction. Thx!
Hi Mike, thatís 100% accurate. Thereís far more volume in a daily candle than a 15-minute candle, which translates to higher quality setups.
Hello Justin, thank you for all your insight and information, am learning from them, my gratitude.
Their is a question I really want to ask, is it possible to be trading on two markets that is contradicting each other after sporting a good setup for the 2 market (I.e buying AUDUSD and selling Gbpusd or in any way) if yes, how do we identify in order to avoid them. Many thanks
Youíre welcome, Moshood. As for trading multiple currency pairs at once, this lesson may helpÖ https://dailypriceaction.com/forex-beginners/forex-currency-pairs
HI JUSTIN YOU ARE RIGHT ABOUT THE DAILY TIME FRAME SINCE I STARTED THIS WAY ON SUNDAY IíVE SEEN SIGNIFICANT GAINS MONDAY 93 PIPS TUESDAY 83 PIPS TODAY 103 PIPS THANKS I WILL KEEP YOU POSTED ON FUTURE DEALS I LOST A LOT ON THE SMALLER TIME FRAME.
Marvin, thatís great. Thanks for sharing.
Thanks Justin. Once again a great reminder! So many conflicting messages out there. Iíll keep your examples of the big guys in my head next time Iím tempted to check lower TFs. Iím going to take up the challenge of sticking to DTF.
Eeish a hard one to swallow Im looking for the holey grail didnt find it stil loosing big time more than what i win yes im trading on the 5 @ 30 min time scale mostley . OK I C THE POINT WIL GO TO THE DAILY TIME FRAME . Thanks Justin
Hi Justin. I canít agree more with your article. You are right in every topic and the Daily chart is the one who shows clear the market direction. I use the Daily charts in my analysis even though i use the 4H for my entries but this is purely based on my strategy and style.
The only thing I still find tricky using the Daily charts alone is that most of the time when I have a chance to look at the charts there is a gap of about 1 hour since the new daily candle opens. Maybe this gap is not relevant for a Daily chart trade but I donít fell confident to not consider this gap. I need to work out this ďproblemĒ but so far the way I choose to trade is showing some good results mostly because if the Daily chart does not match my strategy I donít trade.
Anyway I really appreciate the time you invest in sending articles that sure helps a lot us traders as well as your daily analysis. Thanks a lot for that.
Marcio, I agree 100% with your comment about the daily chart showing the marketís intended direction.
Iím not sure I understand the gap youíre referring to.
Thanks very much for your post! 3 week ago I decided to trade in the daily chart and my results improved dramatically.
Hi Natan, thatís great to hear! Thanks for sharing.
I remember when i started with forex beginning 2013 with a live account, i was happy with 20 pips. I did not apply any strategy, I just did somethingÖ Now, I have trades with profits of 450 pips, above 100 pips for sureÖ (of course I do make losses too). I do not make consistent profit yet, but I do know more than 3 years ago and do not lose my account at all, minimum is break even :-). Thanks to you and your website I am now independent and not follow anyone anymore, I follow my intuition. I trade daily chart using 10,20,50 EMA, price action and I prefer engulfing bars and inside bars over pin bars. Somehow pin bars and not working for me, I learned your pin bar course, but it does not work somehow. Maybe I still need to learn/analyse more about pin barsÖ Love your website, very organised, simple, clear.
Thanks, Fathin. Congrats on the improvements youíve made over the years. It sounds like youíre on the right track!
I agree with you, but the one problem with daily time frame is the danger of gap up or down in monday if someone have to hold oneís swing trade over the week end until the next week.
I am also suspicious about broker hunting of stop loss that if some one do trade with daily time frame he has to hold the position for several days, by then it is easy for broker to manage to hunt his stop loss because the time available for the broker.
How do you cope with the gap up or down that against your position that can lead to loss more than the risk you have set if the gap up or down in monday is go beyond you stop loss?
Petrus, weekend gaps arenít usually a big deal. I actually did a study a few years ago and found that a pair like the EURUSD gaps less than ten pips more than 90% of the time. The more significant gaps tend to occur during weekends with major event risk. So the way to avoid those larger gaps is to become familiar with the event calendar and avoid holding over weekends where such events would pose a threat to your position(s).
Daily time frame trades, are they closed at end of day or stay open over a period of days.
Good info. Thx.
Provided you arenít taken out the first day; the position will stay open for several days and even weeks if necessary.
Great article and I actually started using the Daily and Weekly charts a lot more in my analysis and last week (1 June) saw that 3 EUR pairs were consolidation at the resistance area of the Daily charts for days. I kept on watching them and they broke out above on Friday as I expected. The longer time-frames have their moments of excitement!! Thanks Justin and I will use the longer time-frames (Daily/Weekly) a lot more.
Youíre welcome, Mimi. The higher time frames will open doors you never knew existed. Cheers.
Hello! Quick question thatís totally off topic. Do you know how to make your site mobile friendly?
My blog looks weird when viewing from my iphone 4. Iím trying to find
a template or plugin that might be able to correct this issue.
If you have any suggestions, please share. With thanks!
Good food for thought M.Bennett. Iíll give it a try.
I will give it a try. Thanks for sharing
This is great, this is the key to been a successful trader
Does the daily time frame gap?
Does the daily time frame gap? I would like to know please
Iíve read all what you have said and i want to thank you. it makes a lot of sense to me now. I just finish taking a course a friend of mine paid for me to take. ( MTI courses). Iíve learned everything about the forex market , except for strategies. iím 2 months in. so iím very new to this. iím paper trading now and been on a losing streak ( fooling with the min and hr charts). Justin or anyone whoís reading this, how can i come up with a strategy? that seem to be my biggest problem. I see your mentor community but i canít afford it at this moment. but in due time i will be apart of the community. if its anything you recommend for me to come up with or follow a strategy , let me know iím all ears. Iím sorry for the long comment. Thank you again Justin for the knowledge. Truly Appreciated.
i really love your articleÖ..nice one bro!
anyone who wants to lean how to synchronize monthly chart to 1minute chart should reply my post.
Is it possible to get an indicator that alerts for trade setups or do we have to keep looking at the chat all the time so we wonít miss any good trade but end up loosing it?
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