03 November 2016

Charting and Time Frames when Choosing a Broker

At its core, trading is usually about charts. That is, charts are read and decisions made. However fundamental knowledge can also be considered important, which may at its simplest be captured in a news feed. It is possible to trade without a news feed, relying on other sources or just on the chart.

A problem with fundamental information is that what the effect might be and what it is can be very different. Some data can have a profound effect on the market, but these may be surprises, either in a significant differences between expectations and the actual data or in news which is released where it is not known that there would be such a release, like a surprise announcement or some other unexpected market moving event.

Brokers will typically have different types of charts, around a core of candlestick or line charts. Binary options brokers may only have line charts, but especially on the very short term, this may be more useful. However for longer term binary options, then candlestick charts may be useful as well, as longer term analysis may require greater detail than line charts allow. Conversely, very short term trading may need less detail.

This said, candlestick charts can be useful on short term time frames. For example the one minute chart can show patterns which can be seen on longer term time frames and which can generate trading propositions, which may be proved true or not true by the market. Equally, the one minute chart can become volatile and not be very useful, but this is a consequence of general market conditions, as well as the increased sensitivity of the chart, which can work both ways.

Candlestick charts can be particularly useful for multi-time frame analysis, which can help show patterns of support and resistance and how they are interacting. Relying on one or two time frames, may limit the view of the pair in question. One minute to one week or month is typical, and this can generally give a perspective on the movement of a pair.

The question can be asked then which time frames. One way of looking at this is to look at a range of time frames, and see what is happening on these time frames. This can be done reasonably quickly. So the idea is not to impose an idea of what should be happening in the market but look for what is happening in the market, using the tools available.