Daily Price Action: Trading Strategies for Higher Time Frames
Price action trading is a really great trading strategy in that it is flexible and can be traded over many different time frames and can be made to suit many different traders and their lifestyles.
There are a lot of people that live in a certain part of the world and are only able to trade daily price action chart time frames and for the rest of their day they may have work or other commitments.
For these people they are able to work and still trade by checking their charts once a day at the end of the day at the New York close.
For others in different parts of the world, they may be in bed when this is happening and cannot get to the daily New York close candle and for these traders, they may instead choose to only trade the 4 hour or 8 hour charts.
For this reason, price action trading works well, whereas a lot of other methods and systems they are very fixed and set in stone with the exact time frames that must be used otherwise everything goes out the window.
Starting With Daily Price Action
It is highly advised traders start their trading on the daily charts using the correct New York close 5 day close charts.
The major reasons for this is that the daily charts cut out a lot of the noise that the lower time frames have within them and for traders to learn to become profitable they are a great time frame to start.
As a matter of fact, once traders become profitable on the daily charts, a lot of them never actually leave because they give the best of both worlds that is money and time.
The daily charts also contain more data than the smaller time frames, which means they obviously are giving the price action traders more information to make their trading decisions.
If a 1 hour candle has been trading for 1 hour and has 1 hours worth of price action information inside it and a daily candle has been trading for 24 hours and has 24 hours worth of price action information built into it, obviously the daily candle is showing the price action trader a heck of a lot more about what has gone on.
Another example of this difference in time frame information would be if price formed a pin bar over a daily candle compared to a pin bar over a 15 minute chart.
With the pin bar forming over the daily candle or over 24 hours it is showing a much bigger and more important rejection of price than if a pin bar formed over a 15 minute chart.
The pin bar on the daily chart requires a lot more price action order flow than what has had to go 15 minute chart to turn price around to form the rejection and complete the pin bar. This is also why the smaller time frames print a lot more false signals.
The Process to Forex Trading Profitability
A lot of traders often come to Forex trading just with two things they are looking to achieve; 1: to make a lot of money and 2: to have a lot of spare time, but as soon as they are bitten with the trading bug what tends to happen is something inside their head clicks and they think “If I can go to the smallest possible time frame, I can then make as many trades as possible and make as much money as possible and as quickly as possible”!
The problem is that the move to the smallest time frame is normally done with the smallest amount of education and knowledge of money management. Instead of setting the trader on the path to riches and making the most amount of money quickly, it nearly always ends with the account being eroded in record time.
The great thing about trading the daily charts is that it allows traders to turn this around.
These bad habits that traders have built up from spending time on the smaller time frames can be repaired by moving back and learning discipline and patience on the larger time frames.
These traders need to learn how to go from overtrading to hunting the very best trades. It can also mean that they can get what they come to trading for originally; they can start to spend a whole lot less time in front of the charts and work their way back to profitability.
Daily charts often suit traders with jobs or who just want to do other things in their life or who are only able to check the charts once per day, but still want to be able to trade the Forex markets successfully with daily chart trading strategies.
Trading this way can allow you to have the most stress free trading and means that you will spend the least amount of time in front of the computer. That does not mean that you will have a smaller output.
One of the biggest myths in Forex is that more equals more or that the more trading will equal more profits and it is quite often the exact opposite, especially with traders who cannot control their over trading.
For those traders who learn to cherry pick the best A+ price action trades on the daily charts and then move on until the next high probability setup comes along will do far better than those traders sitting and staring at their computer for hours on end mindlessly overtrading.
Price Action Can Successfully be Traded on All Time Frames
Price action can be traded successfully on all time frames and can be used to scalp the markets, but that does not mean all traders should be rushing out to start trading small time frames. The mistake most traders make is that instead of working their way down the time frames, they normally work their way up.
Traders need to earn their way down the time frames with experience and profitability as they go. What this means is that traders should be starting on the daily charts. Once a trader can prove that they are profitable on the daily charts they can then move down to the 4 hour charts and trade these charts until they are profitable.
This process can be repeated for as low as the trader wants to go down the time frames, but as I said above; many traders actually choose to not go lower than the daily charts because they provide the happy medium of profitability and time spent being at the charts.
Other traders may want to get down to the 15 minute charts which is completely up to them and their trading style.
If a trader wants to work down to the 15 minute chart and become profitable, then they need to earn it.
Being profitable on the 15 minute charts is not just a matter of flicking on the charts and hoping for the best.
Some really high probability setups can be found down on the intraday time frames, but at the same time for those traders who look to take shortcuts and those traders who look to go down to those time frames before they are ready, there are a lot of setups that will quickly eat into an account before the trader knows where it went.
There are a lot more chances to play setups down on the smaller charts than on daily charts and for those traders who take shortcuts and are not ready, it is a super quick way to lose chunks of an account, but for those traders who earn their way down, it can provide some high probability setups to start hunting during the intraday sessions.
The Biggest Mistakes Traders Often Make
When traders move down the intraday time frames they need to be mindful of the mistakes that are very easy to fall into that can hurt their trading. The number one mistake that any trader can fall into whether a smaller time frame or not is over trading.
Traders need to be especially watchful for over trading on the smaller time frames simply for the fact that on the smaller time frames there are more opportunities to make trades and if a trader makes a losing trade there are more opportunities to make revenge trades which can really hurt their account.
Over trading is the number one account killer and it kills super quick too. This is why you need to only work your way down the time frames when profitable and if at any stage you struggle on a time frame, move back up to the time frame above until you are ready to try again.
The biggest factor when looking to make a trade on the intraday time frame that you need to think about is the price action story and where you are playing the trade from.
It is absolutely critical that no matter what the time frame you are playing the trade on that you are still making the trades from a key daily support or resistance level as I discussed in the trading lesson Complete Guide to Marking Support and Resistance.
By doing this it will ensure that even if trades are placed on a 15 minute chart that the trade is being placed from a key level and not from a weak area that could get your trade into trouble.
The last major mistake is relying on or looking for a trigger signal such as a pin bar or engulfing bar too much.
The trigger signals are just confirmation that should be used as confirmation that price is agreeing with what you thought. In other words; the price action story and area you are making the trade from are king and the trigger signal used is the confirmation to enter the trade. Do not make the mistake of the pattern trader of using just the trigger signal to enter trades.
If you want to trade price action on the smaller time frames then you can; but you have to earn it first.
Just like a Doctor has to study or a pilot has to learn to fly, you will have to gain experience, first become profitable on the higher time frames and work your way down. That is the path.
I love the daily charts because they offer really high probability setups, require a small time output and allow time for other things whilst the market makes its moves, but I also really enjoy hunting intraday setups when price has broken out and retraced back into a key daily area.
Leave your comments and questions in section below;
which pairs that i can consider the most atleast 10 pairs
Johnathon Fox says
You can find a list of pairs right here; https://www.forexschoolonline.com//can-cherry-pick-setups-quick-price-action-flips/
Your tutorials have been very educative and they have helped me a lot.
God bless you.
I want to ask about your strategy. You usually advocate daily chart which I find very useful and comfortable considering my job as a medical doctor.
This has been working for me.
However I have a challenge with entry and where to put my stop loss especially for breakouts.
Many a times, we wait for breakout, and expect market to retest the level. What I do most times is to set a pending order (mostly limit orders) because I may not have the chance to be searching for a price action trigger, but I have issues with where to put my stop loss.
Please, what do you advise someone like me to do?
Thanks in anticipation of your reply.
Johnathon Fox says
we have quite a lot on the site that may help.
First you can checkout the following;
Also; if you go to the bottom of each page there is a search box that will allow you to search for topics you need more information on.
Anything else let me know.
This whole idea of taking trades from the Dailies where the main players are moving money between is the smartest idea I have every heard and now see with my own eyes. This is without an doubt the most important piece of advice Johno and other savvy traders give that can get all traders to a place of consistency with their trading. It really does become pretty easy and I dare say predictable when you get used to plotting your daily levels well!
Lovely article as always!
the key is gaining the knowledge and experience of where exactly the key areas are on the daily charts that the intraday setups should be hunted from, but you are right than once this is worked out it increases the probability of the trades and can keep traders out of trouble on the smaller time frames.