In today forex faq, we will be going through 2 questions by one of our fellow traders. Below are the questions
I would like to know 2 things:
- About divergences, sometimes we see conflicting divergences shown in several time frames. For example, I saw once MACD giving one positive divergence on 5 minutes and daily, while 15 minutes gave me one negative and 30 minutes was negative too. Price got down a bit, then rise, after so long. What should we do in those cases? Follow small time frames first, then go for big time frames signals?
- Its a new thing, Japanese Minister is intervene on market now, weakening the yen. This require new approach while trading U/J and others pairs with J. Do you have any suggestions for moments like this?
Thanks a lot
For the first question regarding MACD divergence, it is pretty common to see conflicting signals on different time frames and it makes it pretty hard for traders to make decision.
As for me, I always give more weight age to signal from higher time frame than lower ones. However it still depends on your trading strategy and what kind of traders are you. If you are a forex scalper who enter and exit your position within minutes, I think that you should ignore the higher time frame signal and trade according to your lower time frame.
If you are a day trader where your position stays for hours, you should definitely stick to the signal from the higher time frame. I know some traders who will not trade if they see conflicting signals on various time frames. These traders will then move on to look for another currency pair that has confluence between various time frames.
As for your second question, I am totally a technical trader and therefore have no idea about the fundamental. However as for the government intervention, it definitely have some impact on the currency but I believe that the effect is only temporary and will only last for some time. Eventually it will be the traders that moves the currency.
If anyone of you have anything to share, do give your comment as it will be very helpful to everyone here.