I am new to FX and have a question about entry points. I know that it is best to trade with the trend.
What I have noticed in my demo trading is that when I am looking to trade with the trend, say I’m looking to sell with a long downward trend, and the indicator says enter, say for example it is the stochastic moving from above 80 to below 80 on the 4 hour chart. It would seem to say now is the time to place a sell order. I then go to the 1 hour charts and the stochastic is not indicating to enter a sell order at all, I go further down to the 15 min charts and it may event indicate buy. So the question is how do I read that, which chart is really the one I want to follow?
Stochastic oscillators don’t really measure trends as such, but rather show momentum in a particular direction compared with previous price action. For example, when the price volitility in a candle increases (big moves on one candle) compared to the previous X number of candles, then the oscialltor moves closer to one extreme value or the other. When the candles become smaller (slowing momentum) the osciallor slows down and eventually turns around. If you are using the Stochastic to identify trends on 4H charts then forget it, use your eyes or find something else.
If you are looking at 4h charts for entry then I find it hard to believe that a 1hr stoch on your chart is not also signalling a down trend too, (although it won’t be above 80 anymore clearly). The 4h chart will obviously confirm infomation much later than a 15 minute chart, as you are looking at a broader set of data. For example when a breakout occurs you can see the start of the breakout best on the 1min chart (as it happens) and will see confirmation of the move by observing it over a longer timescale, by which time the 1min chart could be doing something a little different. (this doesn’t mean use 1min charts btw, I’m just saying that you can observe moves quickly by watching them on a higher time resolution. But there are also problems created by doing this too).
I’ll try to explain this as easily as possible, essentially the longer the time frame the more general the picture you are observing. By narrowing the timeframe down to 15, 5 or 1 minutes you are closer to observing the actual buying/selling orders at that particular time, rather than the general trend of orders (bullish or bearish, more buying or selling).
If you are trying to trade with the trend then your 1D or 4H time frame will give you a good overview of the general trend, you should probably then be looking to zoom in to the 15 minute chart to observe when the price is moving with the longer term trend.
For example a really simple stochastic trend trading example would be to identify a clear downtrend on the 4h (how you would do this quicky is upto you but a stochastic won’t be good enough) then wait for a crossover in an over/undersold zone on the 15minute stochastic chart to trade with the trend. Of course the longer term charts will react much later than the 15M chart, causing you to miss any counter trend or ranging market trends, so you will only be able to trade safely when market is trending.
Perhaps look up the alligator osciallor indicator to confirm strong trends on the 4H or maybe Heiken Ashi candle sticks, then use a fast stochastic on the 15min to make your trades once a clear trend is in place.
Good luck.
In my opinion this statement is an oversimplification. Yes one can trade a single time frame but to do so in isolation is to close your eyes to the greater picture. For example using the 1m or 5m to scalp a few pips is one thing but if you are looking to trade the general trend then these shorter time frames in isolation will give no clear insight.
When looking to place a trade it is helpful to know where price action is on several time frames. Assuming price action will move across a high/low tunnel in a greater overall direction on all time frames (which it will) is key. One might be tempted to place a trade on say a 5m or 15m chart when PA is (at least on theses time frames) considered over bought/ sold, but on a 4h or daily? Try pulling up a high/low line chart on the 1h, 4h, daily and weekly on EU… get the idea?
Quite agree - a trend on a lower timeframe can simply be a retracement within an opposite trend on a higher timeframe. One can trade either, obviously, but understanding the relationship between the two timeframes can help one avoid entering a trade just before the trend on the lower timeframe reverses. That’s not very clear but hopefully you know what I mean!
