What Time Frame Is Best for Forex Trading?

It’s a simple question with a not so simple answer. And, it’s a major challenge that any forex market newbie has to face when becoming an active intraday, swing, or day trader. According to Andrew Lockwood, Mentor at HowToTrade.com, the best time frame for forex trading depends on the kind of trader you want to be.

Why? Because we traders have different personalities and reasons why we get to the market to trade. As active traders, we are truly unique animals and we all trade forex with our own goals in mind. Some forex traders aim to make millions while others simply want to earn a day’s pay.

Ultimately, it’s up to you which type of trader you want to be. The truth is, everyone’s circumstances and objectives are different and we can’t determine the best time frame for you. It’s up to you how your trading day will look and feel; the choice is yours! As with all things in life, YOU need to do the hard work yourself.

The best time frame for Forex trading all depends on the kind of trader you want to be.

Andrew Lockwood, Mentor at HowToTrade.com

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Of course, you know us and you know we wouldn’t just leave you hanging. We will do our absolute best to help you find yourself as a Forex trader.

In order to get started on the right foot in the forex markets, you need to answer the following questions:

  • How much time do you have/want to trade?
  • How much time do you want your money to be exposed to the markets?
  • Are you interested in trend trading or trading rotational markets?
  • Do you feel more comfortable as a day trader or in the ranks of swing traders?
  • Do you see yourself as a practitioner of multiple time frame analysis?

The idea is that when you know the kind of personality you have, you match it with the kind of a trader you want to be. Only then you can determine the best time frame for Forex trading that suits YOU. At the end of the day, you have to do some soul-searching and conduct a comprehensive self-inventory.

Don’t worry, it won’t hurt! However, it will take a few hours to tally your strengths, weaknesses, and resources. Then, and only then, will you be ready to trade forex from a position of strength. After all, you have to know where you are going before you can get there!

For example, let’s say you have a day job and a limited amount of time to stay in front of the screens. In this instance, you may be looking at trading on the higher time periods, maybe the daily or the monthly time-frames. So, a career as a swing trader may be much better than day trading with limited time. 

On the other hand, if you have plenty of hours throughout the day to spend in front of the screens, then adopting a scalping trading strategy may be just what the doctor ordered. As a scalper, you’re looking to exploit your trading edge over a large number of trades using minute or hourly charts. This is vastly different from swing traders, who look to make only a few trades per week.

Another very important thing when choosing the best time frame to trade in the Forex market is your objectives. To be successful, your resources must complement your objectives. If not, the conflict will more than likely undermine profitability. Unfortunately for many forex traders, their assets aren’t in alignment with their goals; this is a major problem and one that must be addressed! Be sure that your objectives are manageable and that you have the time, money, and aptitude necessary to achieve them.

Let’s explore the 3 main time frames and objectives below.

Larger Time Frame

On a larger time frame, you analyze the market from a broader perspective. This is a key part of what swing traders do, as they break down the market from a macro perspective.

If you like to take things slow or perhaps you have a tight work schedule, this is for you. Daily(D1) weekly(W1) or Monthly(MN) time frame charts will do good for you. In fact, for many full-time professionals, this is an ideal way to trade forex.

larger time frame, forex trading

The plus side is that you have more time to spare, and you won’t have to worry about paying too much in spreads or commissions to your broker. However, the risks of trading larger time frames can be greater, just ask anyone active in swing trading.  This is especially true when using daily, weekly, and monthly charts to execute the technical analysis. In these instances, breakout, momentum, and trend trading can be expensive undertakings.

To do trade on larger time frames, you will need an incredible amount of patience. Don’t let the fluctuations drive you nuts. You’ve got to learn to HODL

Shorter Time Frame

In shorter time frames, price moves very fast. In fact, the speed of the markets is one thing that day trading aficionados struggle with. If you’re going to trade on compressed time frames, then get used to speed. Business is often conducted in milliseconds, and price can change its path on a dime!

shorter time frame, forex trading

Now, if you aspire to become a  short-term intraday trader, you should consider using the hourly or daily charts. This gives your portfolio more chance of growth as you can take several trades each day. 

The downside?  Well, it can be costly, as you have to factor in the commissions, spreads and swap rates. Also, slippage can be a major factor that can crush even the strongest trading strategy.

Medium Time Frame

The most adventurous of the bunch is the intraday traders, also known as scalpers. These folks trade on the M30 time frame, H1 time frame or H4.

medium time frame, forex trading

The good thing is, you don’t have to sit in front of the computer to watch each and every price movement. All you need to do is apply your technical analysis or trading strategy consistently to the market. The idea is to make small profits on a high volume of trades.

Of course, slippage, commissions, and swap rates can also cut into day trading and intraday trading profitability. Thus, earnings may not be quite as substantial as longer-term strategies.

Does capital play a role when deciding the best time frame to trade Forex?

Yes. And again, YES, but in all capitals. As an active forex market participant, you manage money each and every trading day. This is key, no matter if your swing trading, day trading, or scalping.

One thing that all the objectives have in common is the desire to make money. Shorter time frames let you make better use of margin and have tighter stop losses. Larger time-frames, on the other hand, require bigger stops, thus bigger capital. This prevents you from facing margin calls or stop-outs.

So, swing traders are typically better capitalized than intraday scalpers. While this is a generalization, it’s important to have adequate capital for your trading strategy. If not, your chance of success is vastly reduced.

Trading Strategy Psychology 101: Forex Market Time Frames

As you already know, psychology plays a huge part in Forex trading.  Often, it can be a detrimental factor for newbie traders.

Why?

Well, trading on the short time-frames, e.g. buying and selling off the 1-minute or the 15-minute time period can be very emotional. Not everyone is suited to seeing money coming in and going out of the account in such a short period of time, especially on larger trades. This fact can be exhausting as mental and physical stress can sap the energy out of anyone. When you’re constantly buying and selling, the trading day can get long- fast!

Let’s say you open a larger position, hoping for the best, and then as you watch the trade, you’ll see how a slight movement can either make or break your trading account.  It’s nerve-wracking! I know! Our advice?

If you’re new to trading, we suggest that you leave all that noise to more experienced traders that have a better grip on their emotions and trading psychology. In fact, it may be a good idea to join the ranks of swing traders and forego the stress of short time frame strategies; at least until you gain more experience.

After all, trading comes with enough challenges. You don’t have to make it even more difficult for yourself by increasing your emotional involvement in the shorter time frames. Instead, take a step back and trade of the higher time periods, the 4-hour or the daily charts. Sure, it’s not going to be as exciting as the 5-minute chart, but it will be all worth it in due time! 

Remember – trading is all about long-term success! Once you’ve proven yourself and your skills as a trader, only then should you be looking at trading on the lower time-frames, hunting for those quick profits.

Wrapping Up

The truth is, once you decide on the right time frame, it doesn’t end there; you’re just getting started. 

Another thing to consider is the actual forex market trading strategy you are going to be using.  There are strategies for all conditions and all levels of traders, which include the swing trading strategy, the 5-minute scalping strategy, and other trading strategies, many of which you can find inside our Trading Room, where we not only teach them but trade them live right in front of your eyes! 

It is important to ensure that the strategy you are using is optimised for the particular time period you wish to use. If not, it’s inherently difficult to win at day trading, swing trading, or a long-term investment. So, what’s it going to be? Day trader? Swing trader? Scalper? If you don’t know, be sure to check out our Trading Room to learn more about these strategies.

Our mentors stream live, several times a day. In our trading room, we show how we trade these strategies right in front of your eyes, we provide trading ideas and discuss trading opportunities with the members of our vibrant community. Don’t wait! Join now!