Wed. Oct 28th, 2020

Planet Compliance

Innovation & Regulation in Finance

Why should a lower timeframe be avoided?

4 min read

Many people like a high-risk environment and cannot wait to make a profit. Although trading is viewed as one of the best professions in modern time, certain dangers remain in this sector. Generating profit takes time and it does not happen instantaneously. One needs to wait before finding the right formula and only then it is possible to make the transactions provide financial benefits. In Forex, two types used by traders. The low and the high timeframe each offering distinguished benefits. Despite recommending infinite times, traders prefer to use a lower timeframe.

In this article, we are going to explain in detail why this is not a good strategy at all. Aspiring investors should read this post because people are often misguided in Forex. Rumors spread faster than news and community believe them without confusion. After going through this post, we expect the readers will understand the perils.

Scalping is a bit risky

Lower time frame trading is known as scalping. It is often considered as a risky strategy as you have a small margin to make a mistake. In fact, you have to get the best trading accounts for the scalp. Choosing a faulty account and trying to earn money with the low-end tools will result in big losses. To ensure your success, you must follow a strategic step and open trades without any emotional attachment.  But this won’t be possible if you start your career with the scalping strategy. However, you can check out the autochartist from Rakuten Securities Australia and it can help at scalping.

But both display the same movement, what is wrong with the lower one?

This question arises logically but certain situations exist. For example, it shows a minuscule detail of market occurrence in real-time. This may seem beneficial but overexposure to information might lead to wrong decisions. This only provides a small window that focuses on a relatively smaller period. As a result, the general idea may not develop. Despite illustrating similar movements, different timespan can affect performance.

The overall concept is hard to develop from segregated information

This is the first hindrance to a lower timeframe. As we have already mentioned investors only get to observe what is happening every minute, it’s nearly impossible to formulate overall market situations. It is surprising because many professionals have failed to accurately predict price direction when the timeframe was lowered. Separated data is unable to form a complete reconstruction of the existing market movement. This shows it in a direct relationship with the efficiency of an individual analyzing the chart.

To give you a context, consider watching different parts of a whale at a time. The details are sharper but general construction is not as accurate. You can confuse the skin with water and vice versa. We advise investors to use the hourly or daily window to obtain the best results. Not only it is soothing to observe but contains clear indications of volatility.

Can I use a combination than?

Unfortunately, it is not a great method. Once a person combines different techniques to get results, he is bound to derail from the objectives. Implement one method and depend on it completely. Incorporating numerous formulas on the same movement is counterproductive. This will take up precious time and traders will not be able to take decisions duly. Keep in mind, this does not imply to scalpers or day traders as it is part of their strategy. Don’t get thrilled because it requires immense knowledge to the scalp, let alone survive in such dangerous circumstances.

But this shows more movement than a longer one

Exactly because you are concentrating on every element instead of the whole portrait. The majority fails due to this volatile movement and develop a technique based on this timeframe. This is a waste of opportunity as it never succeeds. Intense volatility does not imply the price is moving so quickly, it only breaks down the movement in finer pieces. Learn to spot the difference while managing funds.

 

 

 

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