Forex trading may be very tricky for new traders. And one of the most popular mistakes made by novice traders is entering a trade while looking at the market trend only in one time frame. Every Forex trader has a certain time frame, which is the favorite one to trade in. it may be a daily chart, week chart and some traders prefer 5 minute chart. So, the mistake, which is made by many traders is looking only at your own chart and failing to pay attention to charts of the higher level in order to confirm the trend.
This factor is so important because the resistance is more powerful, when it has been developed for a longer time. So, if there is an incredible catalyst shown on the day charts, which has been hit several times during the previous two months without breaking the trend, but if you are only paying attention and waiting for confirmation on the hour charts, waiting for the ascending triangle formation, which will break the pattern, you might be totally disappointed.
Day charts show a momentum of weakening upward when there is not enough of buying energy on the market to break the catalyst, even if the hour chart indicates that the price is going to break through. So you are driven by day charts, buy and get stopped out. It is a very common mistake, which can be easily analyzed after it has been made, but you can?t let it happen to you all the time. There are several tips to help you avoid making these mistakes and missing the whole picture on the market.
The first thing to do is look at two time frames, which are higher than the one you follow, in order to confirm a trend. You will be able to use the higher time frame as a secondary indicator before placing a trade, making sure that the trading pattern is proven by both your chart and the higher time frames. If your main charts are hour charts, then you should confirm the trend by looking at daily and weekly charts before placing a trade. If you usually look at day charts, then you should also pay attention to week and month charts before entering the trade, and so on.
Don?t try to make analysis of more than three chart levels for one trade. This can lead to an over analysis which is not necessary. After you start digging into too many complexities of the technical analysis, you lose the ability of analyzing the crowd psychology because not all traders are going to look at all charts before trading. Besides, you just waste too much time thinking about the trade and lose your chance to grab a possibly great trading opportunity.
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