WHY DAILY CHART ANALYSIS IS CRUCIAL TO DAY TRADING & SCALPING SUCCESS
Now, even though I preach the benefits of Swing over all other types of strategies, I always say that knowledge of how the Daily Chart is crucial to avoid unexpected reversals on the smaller time frames. I remember a time when I Day Traded that I only had 1 successful trade out of 32 trades in a single month. Even though I had a good strategy, it was not enough without using the patterns of the Daily as the main guide.
Take this NZD CHF back in September 27, 2016. In the charts and video below, I warned about why it was too risky to start trading long despite the Bull Candle given at Support of the Daily Chart Pennant Setup.
This would have tempted many to start trading Long in hopes of a major bullish move over several days. But instead, the market reversed sharply to take out the Bull Candle and any long positions that were open.
Now this is where it gets tricky. Even though it was a strong bull candle by itself, given the size of the Consolidation, it was weak. What you´ll notice is that certain types of signals are more appropriate for certain size of Consolidation, but not for others. So you have to know which combination of Signals and Consolidations give you the green light to start trading and which are risky to trade.
Just like Indicators, there are times when Candlestick Signals will also give False Signals that lead to losses.
So this is one of many examples I´ve seen over the years that have created traps for traders. Another one that could be on the way is for the EURO AUD.
Daily Chart now giving a Bearish Signal indicating a move back inside Range...
....but the bullish move on the 30 Minute could easily tempt us to start going long in expectation of a Trend Line Break....
Even if it rallies, this is likely to be temporary and risky to trade. The better option will be to wait on a strong bearish signal to ride the wave down for larger trading gains.
Bottom Line.. we gotta analyze the Daily Charts and their Candlestick Patterns in order to stay ahead of this little game...no way around it. Larger Time Frames control the rest of the market and we gotta include them as part of our trading. It will tell us the when, where and how to trade, how many pips we can get, and whether its really worth the risk.