Using Time Frames to Build an Edge

Using, Time Frames, Build an Edge, Forex Strategy, fx trader, forex

The edge

Consistently trading with an edge over the long-term is what separates those who make money from those that don’t. There is, of course, more to trading such as impeccable risk-management, following the flow of money and compounding to name a few but using technical analysis correctly to determine only the most high-probability environments to be trading in is fundamental to trading success. The importance of an edge can not be ignored as you will always be beaten by those who don’t.

The challenge

Understanding how to develop this all important edge is the challenge that private traders face. The creation of the internet has played a major part in clouding how to develop an edge that is most beneficial for the private trader and this has been done by shuffling traders down the route of using the lower time frames. (I define a lower time frame as lower than the daily time frame.)

But as Mark Douglas (RIP), author of Trading in the zone said “It’s the ability to believe in the unpredictability of the game at the micro level and simultaneously believe in the predictability of the game at the macro level that makes the casino and the professional gambler effective and successful at what they do.” Private traders must think like the casino if they want to achieve consistent and effortless compounded-growth on their accounts.

The changes

And so how is this done and what changes need to be made to achieve the returns private traders look for when venturing into trading? The answer is by moving away from trading on the lower time frames and stepping back and finding that all-important edge on the larger time frames. By not looking for instant gratification and quick results but by playing the long game. And by focusing not on many small winners on a daily basis but on a few large winners over weeks and months.

If you are new to trading, I recommend adopting trading on the larger time frames and developing that all important edge from the very start as it is very easy to fall into a routine that leads to undesired results.   

The criteria

As a long-term trend trader, I use the monthly, weekly and daily time frame to find my edge. Each time frame has its own purpose but I use them in unison to establish optimal entry points into what could potentially be an environment for a long-term tend to establish itself.