Fibonacci Trading Plan Archives

Choosing The Right Trading Time-Frame

Some traders profit well on 5-minute charts, while other traders lose their account. Some are really comfortable with 1-hour charts, or 4-hour charts, while others will hold their positions for weeks and months. And then there are retirement accounts that often hold their investments for much longer.

So which trading time-frame is best? What is the best time-frame for forex trading? What about futures, indexes, and stocks? Is one time-frame better for stocks than for forex?

Ultimately the selection of time-frame is a personal choice. No matter what your trading instrument is, the best time-frame is the one that suits your personality and your trading environment. Every trader has different environmental factors. Some trades can only trade a few hours a day, after work. Some can trade part of the day while their children are at school. Some can trade all day, but may have to leave their trading desk in short notice.

You should also be aware that each trading time-frame has advantages and disadvantages. I’ll cover these in detail in a future post, but today I want to focus on choosing the best time-frame for your personality and your trading environment.

I will break trading time frames into 3 categories for the purpose of this discussion: shorter time-frame trading, intermediate time-frame trading, and longer time-frame trading.

*Shorter time-frame trading. *

Shorter time-frame traders are usually using charts that are 30 minutes or under. Trades made in these shorter time frames are very quick trades. You will often see these quick trades referred to as “scalp trades”. Scalpers are most often trading on 10-minute charts and under. Some are even trading on 1-minute charts!

If you are an impatient person, and you like instant gratification, then you will probably be more suited to trading the shorter time-frames. You will probably enjoy focusing intensely on your trades for a short burst of time. If your trade doesn’t have any movement within a few minutes, you may feel very impatient. Your trading will feel more exciting and aggressive when you are trading the shorter time-frames and there is movement.

You prefer to make quick decisions without to much analysis or second guessing and then you will exit your trade quickly if it is not working out. Shorter time frame traders are probably more suited to capturing smaller moves, and trading larger positions to profit from them. They can trade all day, just for a short time each day.

Trading these time frames can be intense and exhausting, so taking breaks is important.

*Intermediate time-frame trading.*

If you trade using 30-minute to 4-hour charts, you can be considered an intermediate time-frame trader. You have more patience than a scalper, you avoid the “noise” of the lower time-frames, and give more consideration to your selection of trades and setups. Your stops will usually be further away than a scalper would tolerate. A more distant stop means that your positions may be smaller than a scalper to keep your risk manageable. You do not feel urgent to exit a trade, and you enjoy bigger moves to take advantage of your smaller positions.

Intermediate time-frame traders may spend a few hours each day evaluating their positions, usually not watching their chart all day, minute by minute. These trades can be monitored several times a day, rather than several times an hour. This type of trading is suitable to traders who have a career that takes them away from the markets part of the day.

*Longer time-frame trading, and investing.

*A trader using hourly charts and up would be considered a longer time-frame trader. A trader using 4-hour and up is more likely to be an investor. You will hold positions for more than a day, and perhaps even weeks or months! You do not monitor your trades every minute and you do not have a sense of urgency or excitement when you consider your entries and exits.

Longer time-frame traders and investors may only review their positions anywhere from once a day to once a week. This type of trading is not a frenetic pace, and the aim is not to enter and exit at the absolute best price at exactly the right moment.

Those are the general categories of time-frames, and the types of traders who are involved in them. The categories are not clear-cut, there is room for discussion about them, but certainly a scalper would not regularly hold his position for 24 hours.

Initially, it is beneficial to focus on one trading time-frame. As your skills improve, you may consider managing different trades on different time-frames. Experienced traders are able to change time-frames mid-stream, while a trade is under way. While most traders start out thinking that only one time-frame is necessary, you should keep an open mind on this topic.

You should evaluate your personality, and your trading constraints to select the best trading time-frame for your situation.

Allow Your Trading Plan To Succeed

 

This is a trader question from the Fibonacci Trading Forum.

Vernon says:
I have the most difficulty with over analysis and Support/Resistance Zones that challenges me when it’s time to pull the trigger.

Neal’s reply;

The real problem is that you can’t catch any fish if you don’t put your hook into the water. If too much analysis stops you from trading, you are guaranteed zero success.

Sometimes it helps to step back and simplify. See my reply about finding high probability trades. Then make the decision to take the trade.

Let your trading plan work for you. Take the trades that match your trading plan. If you don’t trust the plan, then focus instead on making a plan that you can trust.

-Neal Hughes “FibMaster”.

Good Strategy For Trading Success

 

This is a trader question from the Fibonacci Trading Forum.

Vernon says:
What would make the biggest difference to my trading?
Combining the top-down analysis and finding an entry in the lower time
frame based Higher High or Higher Low and TRSI with Fibonacci.

Neal’s reply;

That’s a good strategy!

So, make it happen, find the setup, wait for confirmation, execute the trade, manage it, and exit..

Try to ignore the profit motive for a while. Whether you are trading the TRSI Bounce, TRSI Pop & Drop, TRSI Push, or any other strategy, focus first on keeping the risk within your tolerance. After some experience, you can analyze the results and make revisions to optimize for profits.

-Neal Hughes “FibMaster”.

Vernon says:
I also need suggestions for the following;
Building confidence and trust in the analysis and pulling the trigger
based on the price action, Fibonacci and TRSI.

Neal’s reply;

Confidence requires time and consistency, it needs to develop. Time and experience are part of the recipe, they are necessary ingredients.

There is no way to become confident without following a consistent strategy. Then apply the strategy consistently over many trades, and measure the result. You can speed up the process by analyzing past charts, as well as executing your strategy in live trades.

With experience and consistent diligence, you can develop confidence in your strategy. Start small, with lower risk, then adapt as your confidence builds.

-Neal Hughes “FibMaster”.

Filtering For High Probability Trades

 

This is a trader question from the Fibonacci Trading Forum.

Vernon says:
What part of your trading do I need to improve?

Finding and choosing the higher probability trade and sitting out on others.

Neal’s reply;

This is a constant challenge, and sometimes even the best looking setups will fail. We have to accept the disappointments, and continue to strive for better performance.

Here is the best way to find optimum trades; Look for trades with solid trend, or significant thrust in your favor. A weak trend, or a trend that is showing fatigue, will cause more frustration and worse results.

With trend in your favor, find strong Fibonacci support/resistance (SK Level) for retracement, and then wait for the move to confirm that Fibonacci Level. Trigger your trade with that confirmation, and look for follow-through momentum in the direction of the trend or thrust. This is the basis of the “TRSI Bounce” trade setup.

Those two basic techniques (trend and Fibonacci Retracement) will help you locate/filter those better trade setups.

-Neal Hughes “FibMaster”.

Simple Trading Strategy Wins

 

This is a trader question from the Fibonacci Trading Forum.

Vernon says:

Here is one of my biggest trading problems;

With all the different Fiblevels and Support / Resistance zones in the different time frames, I tend to hesitate once these levels are near and therefore need further confirmations.

Once there is confirmation based on price action, there will be nearby SK Fibonacci Support or Resistance, and this make me wait and analyze further and probably miss the trade.

Neal’s reply;

It is important to keep the context of the trade in focus. What is the trigger? What is required to keep you in the trade? What is required to get you out?

If your setup and trigger is good, then the trade is under way until you have reason to exit. If some predicted support/resistance gets in the way, it will get you out. Or if the predicted support resistance is not strong enough, you will remain in the trade. Your trading plan takes care of that.

If the support/resistance level interferes with your setup/trigger, you will not have a trigger, or you will not have a good setup. Then is not a good trade according to your trading plan, so there is no entry.

So, take the trades on appropriate setups, and let your trading plan take over. Keep it that simple, to avoid analysis paralysis. Trust your strategy, trust that your trading plan will get you in and out appropriately.

What I am really saying is that a simple trading strategy will be a winner, instead of over-analysis and complication. Get back to basics, trade your plan.

-Neal (FibMaster’s Fibonacci Trading Course)

Advanced Trading Strategy (Scaling)

This is an advanced strategy, so if you’re not ready for it, save this one for the future, file it under “Optimizing For Maximum Profits”..

Imagine that 50% of your trades are winners, therefor 50% are losers, and both winners and losers are the same in size. In this scenario, you are near break-even over time. One way to improve your results is to have larger winning trades than losers. If your position was double the size when you win, your profits would be twice the size. Now if your winning trades were all bigger positions than your losing trades, you would come out ahead over time even if you were only winning 50% of the time.

We never know in advance which trades are winners, any trade can become a loser. But as the trade develops, we often get a sense that the trade is a good one, the setup and trigger were executed, and the trend is solid. Using specific setups and triggers, we can take advantage of winning trades to improve our performance.

There are strategies to increase your trade size as the trade progresses, so your winning trades are bigger, and your losers are smaller. With a good strategy, trades that fail quickly will be small, only the winning trades will be larger. An additional aspect, is to keep your risk under control. This is vital for your survival! It is important not to exceed your tolerable risk exposure as you increase the size of your position. Every time you trade, you should be operating according to your trading plan, including your risk exposure.

Imagine if you could increase the size of winning trades, without increasing the risk… Think about that.

These techniques are advanced, well beyond the scope of beginners. I have a seminar that specifically teaches this technique (practical stop-loss planning) on my website Fibonacci Trading Strategies

I don’t present those seminars very often, so watch that website for updates, so you can get in on the “practical stop-loss-planning webinar.

Have You Lost Too Much Money, No Confidence?

This is a trader question from email.

Ivan says:
-Hi Neal,

I need a piece of advice.

When I started trading, I lost a lot of money and now have some problems to enter the market. It is some sort of mental problem. How to overcome it?

Thanks.
-Ivan

Neal responds:

Trading will always be risky. There is no way to trade without risk. so we must learn to accept risk, and to control it.

Unfortunately beginners have the greatest chance of failure, because their knowledge is lacking and their skill is non-existent. So it is common for beginners to lose a lot of money before they gain enough knowledge about risk control and survival.

Once a trader has had major losses, there is damage to the trader’s confidence. Patterns of fear are developed, because the pain of a large loss is so severe. Excess fear causes bad behavior, because our brain is trying to avoid future pain. This can cause the trader to avoid taking trades, to get into a trade late, to get out too early, to avoid placing a stop-loss etc. There are endless ways that fear can cause bad trading.

We have to tolerate a certain amount of fear because of the risk involved. Without risk, no gain is possible, no profits can result.

So how does a fearful trader recover, and start to trade more comfortably? How does a trader regain the lost confidence? It takes time, and experience.

First, eliminate the risk. If you can trade without risk, you can monitor your progress, and build confidence as your results prove to be positive. You can do this within a demo account. Take as long as necessary. After a few months, review the results, do you have confidence in your strategy, in your trading techniques?

Once you develop some confidence, you can begin to trade using risk capital. Once again, control the risk! Start with minimal leverage, and small positions. The goal is not to make huge profits. Focus on technique and strategy. Focus on building confidence. The goal is confidence, not large profits.

After some time, you will have enough confidence to take larger positions, and to use more leverage. Always monitor your fear and stress. If you are too uncomfortable, reduce the risk! You do not want to have another mentally devastating event. The goal is survival, building confidence. Take your time, this is a long-term project, not an overnight miracle!

-Neal. (FibMaster’s Fibonacci Trading Desk)

Moving From A Demo To A Live Trading Account

 

This is a trader question from email.

Bruce asks:
I’ve been trading in demo accounts to get started and am getting ready to start a real account with trading capital. In the past I have made some mistakes which have lost all my demo capital.

I’d like to start with a small account, using real money and grow it. How can I work a small account into a larger account?

Bruce.

Neal responds:
In a demo account you will probably be taking more significant risks. You will be testing new ideas, taking some bad trades, and experimenting. sometimes you’ll take trades with excessive risk. Any of those can erase your account, whether it’s a demo account or real money.

Don’t rush to a live account, because there are many lessons to be learned without risking actual cash. When you do trade a live account, you will be trading with a drastically different mindset, so there will be some adjustment and a new learning curve.

With a live account, trading real cash, you will have to learn to take smaller trades, with less risk, to trade more cautiously.

To build a small account, you will probably have to take smaller profits, have close stops, and avoid those long-shot big winners that you may have tried in your demo account. Try this in your demo account first. If you are consistently making smaller proftis and keeping risk under control, you could be ready to move to a live trading account.

Once you have developed confidence in a demo account, you will know when you are ready to use actual trading capital. If you are unsure, then you are not ready to make the move. Evaluate your confidence level before making the switch. The insecurities and fears you have will not be any less when real money is on the line. When you make the switch, trade conservatively for some time, that’s what it takes to survive.

The biggest difference between trading a demo account and a live account, is how you react to stress. It’s all in your mind, your comfort, your confidence. Developing that confidence through practical experience in a demo account is a great way to start. If you can remain calm and make good decisions while risking real money, you’ll make the transition smoothly.

-Neal. (FibMaster’s Fibonacci Trading Course)

Trading Discipline For Consistent Success

 

This post was inspired by an email I received from a struggling trader yesterday. She was asking about what is missing, why she is struggling to find consistency.

Trading can become very emotional. Before the trade, there is fear of entering a position. During the trade there is the fear of risk and the natural drive to take profits after the trade clears break-even. There is also greed, sometimes a winning trade looks too good, so the trader does not want to exit.

How can a trader work towards consistent performance, towards profits? The answer is to be disciplined. Discipline is one of the most important skills to have.

It takes discipline to define a trading plan, and to stick to it. Discipline is required to stick you your best setups, to enter and exit when you should, and to control your risk exposure.

Discipline is key to long-term trading success, to profits, and key to survival. If a trader doesn’t follow rules, trade optimally, then the trader will eventually fail. The next time you make “bad” trades, resolve to be more deliberate, and more disciplined.

It’s not easy! Discipline does not come naturally, it takes repetition to for good habits. Every time you sit down to trade, consider whether you are being disciplined. Review your strategy, confirm that your risk is acceptable, that your trade setups meet your requirements, that you are not exiting or entering trades emotionally.

It takes constant work. No-one is perfect. Every time you fail to trade your plan, stop for a while, focus on discipline.

-Neal “FibMaster” Hughes.

Using Momentum To Manage Your Trade Exit

 

This is a trader question from the Fibonacci Trading Forum.

What causes me the most difficulty?
Confidence/ Trust in the Fiblevels/ Analysis Paralysis. I recently pulled the trigger on a $500 profit even though it wasn’t near any Fiblevels because it was a solid positive profit. While I believe any gain is positive, and I’m happy with the profit I made – if I don’t trust the Fiblevels then what’s the point!

Neal responds:
Some traders have a strong urge to exit when there is any profit. This limits your opportunity, we are supposed to let our profits run!

I may misunderstand you, but it seems that you are nervous once you are in a trade. At that point you are really depending on momentum and trend to continue. That is where your confidence should be, in the likelihood of a move continuing. At that point you should be more focused on your belief that the move continues, than the Fibonacci levels. Let’s discuss this in a live Fibonacci Trading Forum webinar soon.

-Neal

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