By: Charley Warady
Up until now, when we've been talking about technical analysis and Forex charts, we've been concentrating on the daily Forex charts. The daily chart is great for the Forex position trader and shows clearly the trends that are obvious and easily points out support and resistance points. The daily Forex charts can be used by all Forex traders, whether you are a position trader, day trader, or scalper. It gives a great overview.
For some, if not many, they want a more detailed technical analysis of the direction of the Forex market. Something that will show the greater intricacies of what goes on during the trading day. That is where the Forex charts with shorter time spans come into play.
Available online are real-time Forex charts that will give you one minute Forex charts; five minute Forex charts; ten minute Forex charts; fifteen minute Forex charts; thirty minute Forex charts; one hour Forex charts; and you get the idea.
Depending on the time span you want to focus on, that will determine your method of trading Forex. If you choose to be a scalper, because you like the action and/or you have a limited attention span, the one minute Forex charts and five minute Forex charts are great. You can plot your entries and exits the same way a position trader does on a daily or weekly chart.
The warning here is to make sure your profit/loss ratio remains intact. Do not ride out the losses and cut short the profits, which is an easy thing to fall into when you are a scalper. Because you're not playing for the extended profit, you have to apply the same rule to your loss. If you're going to ride anything out, it should be the profit. You may get aggravated when the market turns around in your direction as soon as you take your loss but that's the name of the game in scalping. You can't live in the last trade. Get up again and get back in. That's where the short time span Forex charts comes in handy.
Even if you are a day trader, the short time span chart can be useful. As opposed to getting in and out as a scalper, the Forex day trader can utilize the chart to add on to existing positions. The chart can lend a hand into the best places to enter a new trade, and can also give you points as to where to lighten up on a position and take some profits while still staying in the market. It's nice to be able to take a close look and an overview of the market when pyramiding a position.
If the market is going to take a turn, it's going to become more evident first on a short time chart. If the market is acting erratically on a fifteen minute chart, it might not show up so obviously in your hourly chart, and certainly not your daily chart. It can be used to send some personal red flags to either be careful with the position you have established, or perhaps to even wait out a dance or two and see which way things are going. In any case, it's important to be careful when trading off the short time charts. We all know the old saying: Speed kills.
By: Charley Warady