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In today’s episode, you’ll discover the truth about the daily timeframe that nobody tells you.
So tune in right now…
Resources
The Truth About Trading Daily Timeframe Nobody Tells You
The Truth About Part-time Trading Nobody Tells You
Trend Following Trading Strategy Guide
Transcript
Hey, hey, what’s up my friend? In today’s episode, I want to talk about the truth behind the daily timeframe that nobody tells you.
The daily timeframe is a very popular trading timeframe but there are a few things that you must know.
1. The weekly timeframe can be your higher timeframe
Why is that? We’ve discussed this concept on the factor of four to six before. Whenever you want to define your higher timeframe, you can use a factor of four to six.
For example, in one week, there are five trading days. So that’s a factor of five, which meets our requirement of a factor of four to six.
This is a concept that I learned from Adam Grimes and Dr Alexander Elder. If you trade on the daily timeframe, you can reference the weekly timeframe as your higher timeframe.
2. You don’t have to worry about the news release
You don’t have to worry about news releases like the NFP, retail sales and stuff like that. Those are news that a short-term trader might be concerned with.
Because if you trade on the daily timeframe, then your stop loss will be referenced on the daily charts. It doesn’t make sense to have 10 pips stop loss when you’re trading on the daily timeframe. If you do, then I can almost assure you that you’ll get stopped out of your trades.
If you trade on the 4-hour timeframe, then your stop loss will be based on the 4-hour timeframe. Likewise, if you trade on the daily timeframe, then your stop loss is based on the daily timeframe.
On the daily timeframe, the range of the candles between the highs and lows is much wider. Using EUR/USD as an example, the range of a candle on the daily timeframe could be around 80 or 90 pips a day.
But on the 5-minutes timeframe, the range of a candle could be around 5 pips. Naturally, when you trade on the higher timeframe, you will have a larger stop loss. When you have a larger stop loss, the news events don’t matter as much.
Because even if there is a sudden spike during the news release, it would probably only be visible on the lower timeframe, like the 15-minutes timeframe, or maybe even on the 1-hour timeframe.
When you look at those news events on the daily timeframe, they’re almost negligible. This is why, as a daily timeframe trader, your stop loss is wider and the news release doesn’t impact you as much.
Of course, major news releases like the presidential elections or stuff like that could still impact your trading. The news releases can still matter, especially those explosive big news. But generally, you don’t have to worry about the normal news release.
3. You don’t require that much screen time
As a daily timeframe trader, you can only put on a trade after a candle has been formed, which takes one day to form. This means you don’t have to be glued to the screen all the time, you have the freedom to do the things you love.
Unlike the 5-minutes timeframe, where a new candle is painted every 5 minutes to give you new information as to whether you should place a trade or not.
On the daily timeframe, you won’t be glued to the screen, you have the freedom to do the things you love or maybe even work full-time elsewhere.
4. You can expect your holding period to be pretty long
Your holding period can be anywhere between a few days, to even a few weeks, or even a few months if you’re a trend follower.
But I think generally for most of you watching this, your holding period would probably be a few days to a few weeks as a daily timeframe trader. That’s kind of the expectations of how long your trades will last when you enter on the daily timeframe.
5. You have more time to make your trading decisions
As a daily timeframe trader, only one candle is being painted every day. You have more time to make your trading decision. You don’t have to hurry and think, “Man, should I enter the trade now? Or should I stay out of the markets?”
If you trade on the 5-minute timeframe, you can see that your window to make a decision is very small, usually within seconds or at most within a minute.
But when you trade on the daily timeframe, you’ll have at least a few hours to decide. For those of you who prefer more time to think logically, the daily timeframe gives you ample time to make a logical trading decision.
And finally…
6. Who is the daily timeframe for
It’s not for those traders who want fast action in the markets, looking to trade 10 or 20 times within a day. The daily timeframe will not be suitable for you.
It’s also not for you if you’re looking to be hired as a prop trader because generally, prop trading is for shorter-term traders in nature, trading on the lower timeframe.
Trading on the daily timeframe is suitable for those of you who have a full-time job and you can’t commit to watching the charts all day.
Or if you want to do part-time trading, then the daily timeframe would also work for you.
With that said, let’s do a super quick recap…
Recap
- You can reference the weekly timeframe as the higher timeframe
- News events don’t matter as much on the daily timeframe
- You don’t have to be glued to the screen all the time
- You can expect to hold your trades from a few days to even a few weeks, especially for those longer-term traders or trend followers, it might even be a few months
- You can make better trading decisions
- The daily timeframe suits those of you currently working full-time or if you want to only trade part-time
With that said, I wish you good luck and good trading. I will talk to you soon.