When people know about currency trading, the first thing they know is the shorter timeframe. This is considered as the window through which people can make decisions about the market. Although there are longer timeframes available, investors prefer to spend less time on the market.
They begin to make their decisions by using this timeframe and start discovering potentials in every volatility. This is where the trading gets risky. When this timeframe is used, even a temporary trend may appear lucrative. The developments are appealing and traders feel they need to invest. This slowly begins to control their mind and they prefer themselves lucky to discover this timeframe.
Everything seems positive till now but the will investors lose capital. When decisions are made based on short timeframes, there are few risks involved. These don’t appear instantly but traders understand them after a long time. By the time they have changed their mind, a fortune has been lost. Reading this post will help to avert this disaster in their career.
Aggressive traders always lose
You should realize the fact, aggressive traders’ keeps on losing money. They never analyze the market data in a rational way and fails to find the best possible trade signals in the market. On the other hand, experienced traders at Saxo Bank loves to stick to the conservative trading method. They know it is the most effective way to make money in the retail trading business. You may think you know a lot and you can trade with aggression. But if you do so, you will keep ignoring the minor details of the market and trade with high risk. Eventually, you will blow up the trading account in a short time.
Short timeframes don’t provide the market development
The market can only be perceived by looking at the overall picture. When a person is using a short timeframe, he is putting himself and the investment at risk. There is no way to know how the trend has evolved. For example, profit is not made instantly but after few hours. In this timeframe, traders will identify sharp declines on the chart. In practical situations, this has no implications for the trend. However, the orders will be placed based on the expectation of making a fortune.
Due to partial understanding, mismanagement occurs and the capital is lost. To better understand, you cannot understand a plot of a movie by fast-forwarding. Only after watching can the audience perceive the theme. The same goes for a short timeframe in forex. To know the volatility and developments, a longer timeframe is required to make decisions.
Can provide incorrect data
Based on the interpretation, it is possible to wrongly interpret the information on the chart. Most people don’t have the knowledge and resources required to understand forex based on such a small picture. Experts can take this chance but they also prefer to use longer timeframes to improve the chance of success. To avoid using the information wrong, a longer picture will help to understand the situation. For example, a minute timeframe will show intense development is occurring whereas an hourly analysis will show no significant movement has taken place. This confusion can lead to a wrong decision which will make customers lose their money.
How do day traders make money?
This is a good question which brings us to explore how they have managed to stay profitable. Forget everything that you have heard about day traders. They appear like some people who are making rush decisions and getting lucky. In practical situations, this community has the most knowledge about the market. With their years of experience, they understand the trend at a moment. This community also has a fortune in its account. If these investors were so careless, they would have lost their capital by now. Though they are using a shorter timeframe, they depend on the long window to confirm their methods.