What Time Frame Should I Be Trading As A Forex Trader
If you’ve been having a look at charts in your trading platform, you’ll notice that there are a range of different time frame charts that you can be trading.
Each chart has a different use and should be used at different points in someone’s trading journey or during various points of trade analysis. It can be very tricky to know which time frame is best for which situation, leading to confusion and trading errors from newbie traders.
Ideally, traders should be using a number of time frames to gauge the long term price movement, strength, entry points and suitable trade management ideas. This is hard to obtain from just one time frame chart.
In this article we’ll take a look at the different time frame charts and exactly what use each chart has to a trader! So, let’s get into it…
Choosing A Time Frame To Trade As A Forex Trader
Time frames can be extremely confusing and you’ll often hear that lower time frame charts are impossible to profitably trade, whilst higher time frame charts have high win rates. This is completely untrue!
All time frames have their uses and ideally they should be used in conjunction to provide a trader with as much information around a trading idea as possible. If you’re only trading by looking at a singular time frame chart, you’re missing so much information about either the shorter term trends or longer term trends. Therefore, there is not one ‘best’ time frame to be trading. Depending on the type of trader you are, there will be time frames that you are using more frequently than others but if you’re striving for real consistency, most time frames should be woven into your analysis. This is the approach that most of our Elite Funded Traders use.
Let’s group the time frames together and take a look at their uses…
Scalping Time Frames – 1M, 5M, 15M
The 1M, 5M and 15M time frames are known as the best time frames for scalpers. Obviously, these charts are fast moving and there is a huge amount of bars printed daily.
This means there are ample trading setups presented each day, leading to potentially higher profits for scalpers than swing traders due to their ability to take substantially more trades. However, lower time frame charts require traders to be constantly sat at the charts and never take their eyes off the screen. This often leads to traders missing setups or not seeing trading setups until after the fact, due to setups happening within just minutes. Price movements on these time frames are incredibly small, in terms of pips – so you need to be very cautious around spreads eating into your profits.
It’s worth noting that taking entries on these lower time frame charts is a great idea as you can often pinpoint the exact price at which price is going to pullback or reverse, when combined with the higher time frame charts.
Intraday Time Frames – 30M, 1H
The 30M and 1H time frames are much slower than the lower time frames but still present a lot of great intraday trading setups. These time frames are typically much ‘clearer’, whilst still presenting a good volume of trading setups. The number of pips is obviously larger than the lower time frames too, meaning spreads and commissions are less of a concern. Depending on your primary time frames, the 30M and 1H time frames can be used as entry points for swing trades too, which often works very well as they’re precise, but much slower than the lower time frames.
As with any other time frames, it’s best to use these charts in conjunction with other time frames.
Swing Trading Time Frames – 4H, 1D, 1W
The 4H, 1D and 1W time frames are perfect for taking large pip movement trades and swing trading. These time frames are often extremely clear and give traders ample time to build their trading hypothesis without stressing about having to pull the trigger quickly. Due to the price movements on these time frames being so large and taking a long time, they’re often heavily influenced by economic and fundamental factors. Therefore traders looking to swing trade need to have a good understanding of fundamental analysis and how to apply it to their trading strategies. These time frames work great for analysis and bias, then you could use some of the lower time frame charts to build a tighter entry price – leading to more pinpoint entries and higher risk to reward ratios.
These time frames are also great for beginners as they’re slow moving and very clear to understand.
Position Trading Time Frames – Monthly
The monthly charts are great for helping to build a picture of the longer term price situation but not great for trading. The reason for this is just simply the fact you do not have many candles per year – meaning setups rarely present themselves and even if they do, they take so long to play out, you’d need substantial trading capital to make them worth trading. This time frame still certainly has its use… When building up your trading ideas for swing trades or intraday trades, understanding the monthly and fundamental bias may help you make more informed decisions, whilst also potentially giving you the ability to hold trades for longer in the markets.
Multiple Time Frame Analysis
The best approach in trading is typically to use multiple time frames to piece together a more complete profile of a trading opportunity. For example, a bullish trend might look incredibly strong on the 5M timeframe but it’ll only be a small pullback in a much larger bearish trend on the 4H timeframe. Therefore, multiple time frames will provide a more complete picture.
Let’s take a look at an example:
Here, you can see a daily demand zone, where we would expect to see a movement in price. Once drawn, we drop to a lower time frame to look for potential entry points.
On the 4H, you can see a support level, which may turn to resistance, to be aware of. We can also see a trendline, which we will look for a break of, to get into the trade.
On the 30M, we can see a bullish trend, with a break of the trendline and a higher high being broken. This is a perfect entry point into the trade.
The risk to reward on the trade was a staggering 1:7.5, by combining the higher time frame move with the lower time frame entry point!
In Conclusion – How To Choose A Time Frame To Trade?
In summary, it’s important to choose a time frame based upon your strategies and needs as a trader. However, the best approach would be to use multiple time frame analysis to build a more complete trading picture