It is quite common when I speak to traders to find them immersed in their charts. Many short term and intraday traders like to focus on what is happening ‘right now’. Many will focus on the 1 minute candles and may extend this out to the 5 minute charts. This is great if you have real time charts and direct market access to your traded markets, if however you trade on a traditional spread betting platform the reality is you need to take a step back.
I would say that the 5 minute charts are the lowest you need to go in order to both chart and find a good intraday entry point. For day trading the hourly charts provide the best overview of where opportunities lie and in which products.
Personally no matter what I am trading I start at the monthly view and work through the time frames. What may be a better option for today’s trader is to start with the daily charts and to then zoom in. There are two reasons for this:
- The markets have memories. What happened in the past, will always have some impact on future movements. Memories are a result of trades. So eventually short, medium and long term trades will all have a ripple effect on the markets.
- Long term trends are good to know and also to forget. Many people like the idea they can ‘fade’ fundamental data. The problem is that you have to know what fundamentals you are choosing to fade. The world is changing so quickly that what was important or cause significant shifts in the past may not only be irrelevant now, but actually be counteracting itself.
Take QE for example. If you look at the S&P making record highs, this is not to do with company’s performance, it is the outdated view that QE, too big to fail and the FED can always back up business. We know this can’t go on forever.
If you are looking a cable for instance. It is clear there was a down trend in the £ vs the $ in the long term. However with the uncertainty the Brexit has brought this compounds the long term trend and speeds it up. So until Article 50 is triggered there will be more pressure on the ‘uncertain £’ and more interest in the ‘less uncertain $’ with the bonus interest rate hike on the horizon.
Simply put you look to sell the £ high against the $ where you see some sort of short term value. Breaking the hourly and 15 minute Fibonacci levels is a good momentum intraday trade. You are selling into breaks and looking for the overall fundamental and technical trend to push the £ lower.
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