This week’s question comes from Henrico, who asks:
What’s the best day to analyze my Forex charts?
Finding the right time to analyze your charts is essential.
It may not seem like a big deal, but it can mean the difference between finding profitable setups and ending the week with a loss of capital.
When I started using technical analysis in 2002, I had no routine. I would draw levels here and there whenever I had the time and hope for the best.
Today, I have a scheduled block of time for performing my chart analysis.
Doing so enables me to mark up my charts as necessary, free from distraction. More importantly, it’s a way for me to draw levels ahead of time to allow the market to come to me.
It also provides a full week of activity which helps me determine the best approach for the upcoming week.
If you feel like you’re constantly chasing the market, this post is for you. I’m going to let you in on some trade secrets, including when I perform my analysis and how it helps me stay patient once the trading week begins.
Ready to do this? Let’s go.
The Weekend 'Forex' Warrior
My weekends aren’t exactly free these days. Between running this website and the member’s community, I don’t get much downtime.
Still, weekends are my best bet for carving out some chart time.
While it helps that the retail market is closed over the weekend, the real advantage for me is the respite from a busy schedule.
I wake up every day at 5:30 am, which gives me a couple of hours of study time before the missus is up. Even the dogs sleep in on weekends, so it’s just me and my charts.
I usually conduct my analysis each Saturday morning, about 24 hours before I release Sunday’s weekly forecast.
Performing my analysis before the market opens gives me the advantage of taking a ‘wait and see’ approach. I simply set my levels and then wait for the market to establish a favorable opportunity to buy or sell.
One mistake I see many traders make is that they have no set time to analyze the market. This leaves them chasing setups left and right during the week.
It’s far better to let the market come to you. It helps you maintain an objective stance until something worthwhile comes along.
Market Volume and Weekly Signals
One reason I favor the daily time frame above the 1-hour and even 4-hour charts is due to the increased volume.
Quite simply, there’s more trading volume in a 24 hours period than any 1-hour or 4-hour block; as long as you’re comparing the same currency pair, of course.
Why does volume matter? After all, isn’t it just a mixed back of buy and sell orders?
Not when you understand that the Forex market is merely a voting system.
Think about it. Your decision to either buy or sell the EURUSD comes down to whether or not you believe the pair is overvalued or undervalued. In other words, whether you think it will move higher or lower.
It doesn’t matter how you arrive at that conclusion. You may utilize simple price action like myself, or use fundamentals to evaluate the Euro and U.S. dollar collectively.
Either way, the moment you buy or sell the EURUSD you’re casting your vote. The more votes there are in a specified period, the more reliable any resulting signal is likely to be.
Just like a daily candle contains more volume than a 4-hour period, a weekly candle has more volume than a daily one.
So, by performing my analysis over the weekend, I have the advantage of seeing those ‘votes’ for the entire week.
That allows me to pick out patterns like the EURNZD weekly bearish pin bar below.
I mentioned this particular formation in last week’s Q&A. A 50% entry of that pin bar has traders in profit by 200 pips at the time of this writing. And the pair is still overextended, which means additional downside is likely.
For many, the next logical question becomes – why not just trade the weekly time frame then?
Why not, indeed.
It’s a perfectly logical thought process when you consider the volume advantage it offers. In fact, some of my members use the weekly charts to find 90% of their setups.
The downside is that your average trade will take weeks if not months to play out. But if that isn’t a problem for you, trading from the weekly time frame may be one viable (and profitable) approach to consider.
Even if you don’t use weekly signals like the one above, performing your analysis at the end of each week will give you a distinct advantage over those who don’t.
Never Stop Challenging Your Analysis
As traders, our work is never done. Once you’ve performed your weekend analysis, it’s important to continue to monitor your levels throughout the week.
The great thing about price action is that we get to see whether or not the market respects our levels.
If it does, great. We can watch for buy and sell signals from the area depending on whether we’re bullish or bearish that particular market.
If not, it might be time to either remove the level or adjust it as necessary.
It’s an ongoing process of drawing and tweaking levels to determine the best placement possible.
However, it’s important not to go overboard. While it can be advantageous to adjust levels as the price action unfolds, it can be all too easy to ‘form fit’ your levels.
This happens when you adjust levels to benefit a trade idea on your watch list, rather than staying objective with your analysis.
So if you tweak a support or resistance level, just be sure it’s justified by the price action on the chart. Otherwise, you’re better off leaving it alone.
What Fits Your Schedule?
Not everyone has weekends off. Heck, even I don’t fully get them off, given that I continue working on the website over the weekend.
Nonetheless, it’s my best chance at carving out some chart time.
If you’re someone who works weekends or has other obligations during that time, you will need to find an alternative.
One reason I choose to do my chart analysis on weekends is because the retail market is closed. That means I don’t have to concern myself with where the Euro is or what the U.S. dollar is doing.
However, the greatest advantage for me is the downtime. The ability to sit down at my charts for 30 to 60 minutes with no distractions is priceless, not to mention rare.
You should strive for the same. If that means performing your analysis on Monday, so be it.
By doing your analysis at a set time each week, you’ll be less likely to chase the market when a new week begins. Having your levels in place when the market opens means all you have to do is sit back and wait for setups to come to you.
That’s a far less stressful way of trading Forex; and less stress means more profit.
Choosing the right time to analyze your charts is vital to your success. Do it when you’re in a rush or not feeling 100% and you might miss something you’ll wish you hadn’t.
I prefer doing my analysis over the weekend when the retail market is closed. It’s a time when I’m not as busy, which allows me to commit all of my energy to the task at hand.
I’m also not concerned with the market’s movement over the weekend. For 48 hours the market is at a standstill, which is great for analyzing Forex price action.
Being able to analyze a full week’s worth of volume is also priceless. Those buy and sell orders, or ‘votes’, give you the insight you just can’t get with any other time frame.
However, it’s important to find a time that fits your schedule. You may not have downtime on the weekends like I do. If that’s the case, you’ll want to find a time during the week that allows for 30 to 60 minutes of analysis.
You will also want to monitor your levels throughout the week. Be sure to check on your charts at least once a day to evaluate how your levels are holding up.
If you need to make changes to your levels, that’s okay. The market is fluid, so why have a rigid approach to drawing levels and patterns? Just be sure you don’t overdo it.
Your Turn: Ask Justin Anything
I’d love for this new weekly Q&A to be successful and provide an invaluable repository of answers to common Forex questions.
To do that, I need your help.
Here’s what you can do to get involved and have your question answered in next week’s post:
- Ask questions. Post them in the comments below or Tweet them to me @JustinBennettFX
- Help me answer questions. If I missed something or if you have something to add, don’t hesitate to leave a comment below.