What is the best timeframe to Trade?
Every trader has their own trading timeframe strategies. Some trade daily timeframes and others trade lower timeframes. Have you asked yourself why you are successful in one timeframe and not the other?
Do you ask yourself why some traders have opted to trade higher timeframe to lower timeframe? If you are asking yourself ” which timeframe is good for me” I am going to explain in this article all about timeframes.
As you may have seen in case you have been in forex trading industry, timeframes trading strategy is one of the most important concept to master. The Most common trading timeframes include:
- Monthly- time frame
- Weekly -time frame
- Daily -time frame
- 4hrs -time frame
- 1hr- time frame
- 15mins- time frame
- 3/5mins-time frame
- 1min-time frame
What is a low-time frame trading
A low time frame is described as anything from a 15-minute chart to a 1-minute chart.
When you trade on a lower time span, you will find a lot of trades every week or even every day. All is happening quicker, and the trade setup you’re looking for appears more frequently.
How does a trader with a lower time frame trade?
Since each movement is so fast, the lower time frame trader will remain glued to his monitor for the duration of the trade.
He or she will begin the day by examining the day’s opportunities, and once he or she enters a trade, he or she will be watching any movement on the chart. When a trader joins a trade, the market will change quickly, so the trader must be prepared for any eventuality. A shorter time to make a decision can result in less-than-ideal decisions. On the shorter time scales, stress is a significant factor.
Actions to take
A trader in this timeframe has to be prepared and have a plan in case their plans fails. Below are some of the plans a trader may have in mind.
- What will I do if my trade doesn’t take off?
- What will I do if the buyers/sellers cannot break this resistance/support?
- When will I extract some money?
- What will I do if the trade starts going in the correct direction, and spike back at my entry?
Whatever happens, the trader will have a strategy and put it into action. This is especially important in a shorter time frame, where emotions and stress can quickly take over.
What are the advantages and disadvantages of a shorter time frame?
Advantages
– Quick results; you’ll know whether your analsyis of the market was right or not within an hour.
– Every day and week, there are more opportunities as the trades take shorter period to set up.
– You can gain more experience by trading frequently (however, a strong post-analysis is needed to improve and learn from your mistakes).
Disadvantages
-Keep an eye on the spread.
Your stop can only be a few pips, making it easily hittable. Furthermore, your spread will easily eat up 20 to 30% of your earnings. That is to say, you must have a high win rate.
– Stay away from breaking Market news.
During major news events, your spread will easily reach 20 pips. This spread can be catastrophic when you have a 5 pip stop loss. So try to stay away from the news or adjust your stop loss accordingly.
– Psychology is extremely significant.
When a candle moves quickly, the emotions will quickly take over. You may also join or leave a trade based on your feelings rather than your analysis.
How about a longer/higher timeframe?
a) What is a higher timeframe trading?
We usually include everything beyond the 1-hour time frame, so everything from 1-hour charts to daily charts and even weekly charts.
Since the fluctuations are sluggish in a high time frame, you have more time to look at your chart and properly analyze the market before entering your trade.
b) How does a trader with a higher time frame trade?
A trader with a high time frame can examine his charts to see what is going on in the market. With his price action experience, he’ll be able to tell whether a trade will be ready soon or if he’ll have to wait a while before entering one.
The majority of the time, getting ready for a trade will take hours or even days. As a result, a higher time frame trader would keep track of all the trades he or she is considering, as well as the number of hours it would take and revisit the trade to see if it has progressed as expected.
The average pip value of a trade in a higher time frame can be very high. Hundreds of pips can be made on a single trade.
You’ll almost always need the assistance of certain activities, such as market news , to drive the market that far. This is why a high time frame trader should check to see if any news will be released at the time he or she is looking to enter a trade It is not necessary to comprehend the news. A higher time frame trader, like a lower time frame trader, would base their course and entry on price action. To get the news coming, you can use a trading forums like Forex factory.
What are the advantages and disadvantages of a long time frame trading ?
Advantages:
– Slow motions
Before you enter a trade, you’ll have time to analyze your charts.
– There’s no need to keep track of the charts.
You should check out the day’s/upcoming week’s trades. If your trade isn’t ready yet, you’ll note that it’ll be a few candles (or hours/days) before it triggers.
– Feelings
Your trade will move slowly, preventing you from being too emotional and jumping into a trade that isn’t ready.
– Spread
Since the moving average is larger in the high time frame, the stop loss would be large. The spread would have a smaller effect on your trade and profit.
Disadvantages
– Weekly trades are reduced. The nubmber of trades per week are less. You might take 1-2 weeks getting an entry in a high timeframe trading.
– Patience is important for your entry. Waiting for the setups to be ready for entry may take a longer time.
– The requirement for news events- This higher timeframe trading strategy depends more on knews for noticeable movements.
Which Timeframe would be most beneficial to you?
You’ll prefer a short time period if you’re looking to:
– At an opening session, you should sit in front of your charts for a few hours (London, US, Sydney or Tokyo)
– Have a thorough understanding of price movement
– Do not get too emotional when a candle moves.
– Prefer fast outcomes
– Work with a broker who helps you to set small stop losses (low spread)
If you’re looking for a long time frame, you’ll want to:
– Are you working or don’t have time to sit in front of your charts for hours on end?
– Have patience and prefer to analyze the chart thoroughly before joining a trade.
– You’ve just recently begun trading and are learning about Price Action.
– Would you like to spend your money gradually? (works for weekly charts)
– Enjoy trading around current events
The Final Recommendation:
We recommend that you always trade the various time frames on a demo account to determine which one is better for you 😉 Its after 100-200 a trader can determine which timeframe is good for them. I advice newbies to start with a higher timeframe trading before they trade on a lower timeframe.