Unlocking the Secrets of Daily Chart Trading

Successful daily trading requires breaking free from a casino-like mindset of chasing quick wins. Traders should focus on analyzing daily charts, which reveal significant patterns and trends while reducing emotional impulses to jump on fast moving prices. A sustainable approach combines strict risk management, limiting position sizes to 1-2% of capital, with patient decision-making. Mastering emotional discipline and maintaining a structured routine helps avoid impulsive trades.

Quick Overview

• Establish strict risk management by limiting position sizes to 1-2% of trading capital and implementing clear stop-loss levels.
• Focus on daily chart analysis to identify significant trends and patterns while avoiding short-term market noise.
• Develop emotional discipline by practicing patient trading and avoiding impulsive decisions driven by market volatility.
• Create a structured trading routine that emphasizes thorough analysis and systematic decision-making processes.
• Wait for clear trading setups rather than forcing trades, recognizing that profitable opportunities don’t occur every day.

Breaking Free From the Casino Mindset

While many traders are initially drawn to the fast-paced excitement of short-term trading, this approach often mirrors the destructive patterns found in gambling behavior.

The gambling mentality leads traders to focus on quick wins rather than sustainable strategies, causing them to overlook important risk management principles.

Breaking free from this mindset requires developing emotional discipline and shifting focus to longer timeframes like daily charts. This transition helps traders make more calculated decisions, reduce impulsive trades, and build a foundation for long-term success.

5 Best Things About Trading The Daily Time Frame

I can only speak from my experience about what the best things about Daily chart trading are (don’t ignore the weekly chart either) but am sure you too will find them enticing.

1. More Time – Less Pressure

Instead of watching every single price movement like on the shorter time frame, I can come in the later half of the day and look at the daily charts to see if my setup is clear.  Getting a clear picture of the market gives me time to objectively see my setup or not.

I am not doing this with the 1-minute chart/ 15 minute, as I would with scalping/day trading.

I do it once per day when the daily candle closes or is about to, and can quickly scan through the price charts to find a setup.  I am not “on the clock” to get my orders in as quick as possible before price takes off.

The urge to jump in on a fast moving market as seen on smaller time frames, is not a problem on the daily chart.  It takes a full session before the candle closes and unless I am using limit orders, I only need to think about the closing price and where it is on the chart.

Using a basic pullback approach and standard trend lines and support/resistance zones, you will quickly know if there is a setup or not every day.  The red X are examples of days it would take you 3 seconds to see if a trade is present.

The green checkmarks would have you stopping and spending some time on the chart to ensure it meets your specific setup criteria.  You run through your list on your trading plan and enter trades according to your plan.

2. Less Trade Frequency – Better Odds

I don’t need to spend every waking hour staring at the screen as I know what time to look at the market for setups. Even though I did try to stick to a day trading schedule with specific stop times, I didn’t want to miss a big move.  The trade signals on lower timeframes can come quickly.

On the daily chart, I also find the setups lead to bigger runs.  On the smaller charts, adverse price action would violate the trade while an entry on the daily chart would still be valid.  I became a swing trader without even thinking about it.

Having a large margin for price action against the position, gives price time to work in my favor.

Yes, there were times I’d enter a higher timeframe trade and see adverse action soon after entry.  Since the stops were further, I was able to manage the trade to limit the overall percentage of the accepted risk.

• My overall win rate went up as risk was not exposed to the market as often
• My overall return increased with less time in the market

The less trading, the less I will pay in transaction costs. While a few dollars here and there doesn’t seem like much, it adds up over time.  Fewer trading opportunities is probably what most traders need, especially beginner traders, need.

3. Less Influenced By News and Data Releases

I remember starting to trade Forex and being lured into trading Non-Farm Payroll release.  Those fast spikes looked enticing but often times, the slippage I got made it not worth the effort.  Add to that, any lag in data or order entry would end up costing profits.

With the daily time frame trading approach, the news or even spread widening by a Forex broker has little effect on the trading position.

Most traders, actually any market, will generally use swing highs and lows for their stop loss location.  You can bet that many traders were taken out of their positions on these two spikes at the extreme of a trading range.

4. Focus On The Trading Process

The daily time frame gives you time.

• Time to work through your trading plan
• Time to learn to let profits run
• Time to pursue other streams of income

You don’t need to have a full time job before you choose to use the daily charts.

One thing I find amusing are people who say “why make trading videos or sell products when you make money trading?” If you have time to have another stream of income, why wouldn’t you?  This is why we see a lot of people take up trading while they have another job.  They understand the concept of not putting all your eggs in one basket.

With the higher time frames, your trading day is quite short.

Longer term trading, be it swing trading or position trading, won’t have you reacting to every blip on the screen.

Traders who choose a longer term approach begin to harness the ability to let their profits run.  They don’t scalp out small profits while taking big losses.

There is a drawback though.  You may, depending on your stop loss approach, give back more unrealized profits as price pulls against you.  That’s the trade off.  In time, you will learn that sticking to the plan you designed, was always the best way to go.

5. How Much Is Your Time Worth?

On the smaller time frames, you are spending hours at your trading desk risking $50 make $100.00. Maybe less. Why so little?

Most traders are undercapitalized which means they can’t afford a bigger position size.

What about losing trades?  They add up.  Walking away with $20 for your time is just not worth it.

With the higher timeframes, I know days in advance if a trade is coming up.  I can set a buy stop order and leave it to trigger, as an example, if price breaks resistance levels.

I don’t need to sit in my chair all day looking to push buttons.  You are worth more than a few bucks an hour for your time. Think bigger.  A part-time job with a full-time job income.

Handling Market Movements on Daily Charts

When traders shift their focus to daily charts, they gain a broader perspective of market movements that helps them make more better trading decisions. By studying price patterns and understanding market timing, traders can identify significant trends and potential reversal points with greater clarity.

This approach allows traders to spot key support and resistance levels while filtering out the market noise that often plagues shorter timeframes. The daily perspective provides a more balanced view of price action.

Daily Time Frame Trading Strategy

I want to give a simple daily time frame strategy that is suitable for swing traders. Don’t be deceived by its simplicity. You will use two trading indicators:

• 20 period simple moving average
• 5 period ATR (average true range)

The trading rules are as follows for buys:

1. Wait for price to break above the 20 period moving average
2. 2 candle lows must plot completely above the moving average to point out a trading signal
3. After the second lows plots, place a buy stop order at 20% ATR above the high of the highest high of the two candles
4. Set your stop 20% ATR from below the moving average
5. Trail your stop loss using the moving average

Let’s look at an example on the daily chart of AUDUSD:

We can see that price has broken above the 20 SMA and we need two lows above the average.

• Upon completion of the second candle, we can see it is the second low above the average.  We place a buy stop order at 20% x 5 period average true range.
• The initial stop loss is placed at value of the moving average – 20% x 5 period ATR
• Trail your stop at 20% x 5 period ATR below the moving average
• First trade exits at 146 pips from entry

You don’t see a setup to the downside but we get another valid buy setup.  Follow the same approach as you did for the first trade.

Let’s take a look at some other setups and this time we will use Bitcoin.

You have to accept losses in trading and the first trade is a loss when priced retraced 4.5% from entry.  No sooner had you entered and we had an immediate price reversal that hit your stop loss.

The next setup doesn’t trigger and for those that understand price action, you may have skipped this trade due to the momentum move to the downside.

We then get trades that don’t trigger due to our ATR buffer. We finally get a long setup that triggers and is currently up 38% from your entry price.

Working Around Support and Resistance

I’m not one to want to make tweaks to avoid a loss however there is some merit in considering the structure of price.

When we begin to see price flipping around the moving average, it is the sign of a trading range.

The first trade on the left is valid but price eventually pulls back and stops out for less than the initial risk.  That is a good thing.

Price begins to put in action that begins to range.  Marking of the highs and lows of the immediate range can help avoid being in trades that immediately reversed.  Some traders may have begun to expand the range when you see the low of the range break to the downside.  Price does head back into the range.

By doing so, price would have to travel far from the 20 period average price and that can lead to a snap back in price.  It would be a two second analysis of the chart to have you deciding to step aside from this crude oil chart and onto another instrument.

Your Questions Answered

How Long Should I Backtest a Daily Trading Strategy Before Going Live?

A thorough backtesting duration for a daily trading strategy should span at least 12-24 months to account for various market conditions.

This timeframe allows traders to observe how their strategy performs during different cycles, including bull and bear markets.

Strategy optimization should focus on consistency rather than maximum profits, ensuring the approach remains viable across multiple market environments.

What Percentage of Winning Trades Is Considered Good for Daily Timeframe Trading?

A winning percentage between 40-50% can be considered good for daily timeframe trading when proper risk management is in place.

What matters more is the risk-to-reward ratio, where winning trades should capture larger moves than losing ones.

Trade psychology plays a vital role, as focusing too much on win rate can lead to poor decision-making and overlook the importance of position sizing and overall profitability.

Should I Use Leverage When Trading on Daily Charts?

Using leverage on daily charts should be approached with extreme caution.

While leverage can amplify gains, it also magnifies losses and increases the risk of margin calls. Traders should start with minimal or no influence until they have consistently profitable results.

If using leverage, keeping it low (1:2 or 1:3) helps protect against sudden market moves that are common in daily timeframes.

How Do Seasonal Market Patterns Affect Daily Chart Trading Strategies?

Seasonal market patterns create predictable market cycles that traders can use to their advantage on daily charts.

These seasonal fluctuations often repeat yearly, influenced by factors like earnings seasons, holidays, and weather patterns. Traders who understand these patterns can adjust their strategies accordingly, planning entries and exits around known seasonal trends.

This knowledge helps them avoid unfavorable trading periods and capitalize on historically strong market movements.

Which Currency Pairs Work Best for Daily Timeframe Trading Strategies?

Major currency pairs like EUR/USD and GBP/USD are ideal for daily timeframe trading due to their consistent liquidity and predictable currency correlations.

Traders should also consider pairs with moderate volatility analysis patterns, such as USD/JPY and AUD/USD, which offer clear price movements without excessive swings.

These pairs typically provide enough daily price action for profitable setups while maintaining manageable risk levels.

Conclusion

Daily trading offers a balanced approach to market participation, combining strategic analysis with emotional discipline. By focusing on daily timeframes, traders can develop a more sustainable and less stressful trading routine while maintaining a clearer perspective on market movements. Through proper risk management, patient decision-making, and community learning, traders can build lasting success in the financial markets.