Online Forex Trading and Understanding Movements in the Foreign Exchange Markets

Online forex trading is very confusing, due to market volatility. Only the daily trend can guide traders through all this confusion, and towards solid trading.

Online Forex Trading during High Volatility

Online forex trading becomes very confusing when market volatility is high. Market movements seem to make no sense. And risk becomes increasingly harder to control. This is why all traders need to do some homework on the daily trend. By studying the daily chart of the market in question. Forex charts provide all this information, mainly through the daily chart. The reason for thinking like a daily chart oriented investor is based on some facts. First and foremost the daily trading action carries much more weight than any other time frame. It is based on the natural daily global business cycle. Then, there are large size investors, such as investment banks who make their own trading decisions based on the daily chart. Price movements seen on the daily chart are very important. Whereas price movements seen on the one hour or 4 hour charts are much less reliable. Because lack of liquidity occurs for few hours at a time, but hardly ever occurs for several days. And lack of liquidity can produce all kinds of price extremes and false breakouts.

Online Forex Trading is Safer through the Daily Chart

Online forex trading can become much safer through the guidance of the daily chart. Because many false signals are detected early. Even day traders need to pay attention to the daily chart first. Before they focus on any single trading day. After all, if the market goes up, there will be many up days for a day trader to look to make long trades, and not short. Those who want to learn forex basics and are in the process of learning, may make the mistake to think otherwise. They might think, that day traders make the entire market move. But due to the liquidity factor, this is not the case. Only the chart where liquidity problems are spread over a wide time period, the real trend can be inferred safely. And that is the daily chart.

Avoiding Confusion in Market Moves

It is wise to be suspicious of fast-occurring market moves during the trading session, especially during low volume hours. This is when liquidity is the lowest and price volatility is the highest. Currency pairs tend to be most liquid and most reliably moving, during their active trading hours. Trading outside the active trading time zone is characterized by a lack of conviction. And by trends that eventually fail and reverse very soon. Wise traders seek to fade such trends and trade in the opposite direction that market momentum offers them.