One of the biggest mistakes traders make is looking at a Forex trading time frame which is too short. Virtually all online trading platforms have the ability to show you time frame charts with everything from "ticks" of several seconds, to 1 minute, 2 minute, 5 minute and so on up to monthly periods.
As shown in the Trading Platforms - Broker area, it is in your Broker's best interest if you trade more often, but not yours. These shorter time charts do nothing good for you, but rather tend to give you a false sense that you are following a trend.
As we all know, the safest Forex strategy is to determine the major trend, then jump aboard for a ride. Trading against the trend, something you could easily do if not using a suitable Forex trading time frame, places you at greater risk of your trade going against you.
Your Forex strategy should include using longer time periods when determining the trend. Don't even look at Forex trading time price charts with a period of less than 1 hour, unless you are a very well experienced trader.
When considering a trade, check 3 time frames... the 1 hour, 4 hour and daily for the currency pair. If each of these is trending in the same direction, it's a pretty solid piece of information.
As you can see by the picture below, a simple candlestick chart with a 50 period simple moving average to smooth the data will clearly indicate the underlying trend...
Price movements occur during the day to day business of Forex. Large central banks cause price fluctuations just by repatriating money from their country to others.
These random movements (which are not caused by the typical drivers such as data releases) may give the false illusion of trend changes on shorter time period charts. This same activity on a longer term chart simply appears as "part of the flow", as it should.
Use a longer Forex trading time frame and reduce the chances of false signals.
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