What Time Frame Is Best for Trading?


Simple question with a not so simple answer, and a major challenge any newbie trader has to face when trading the markets. 

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

Andrew Lockwood, Mentor at HowToTrade.com

Why? Because us traders have different personalities and reasons why we get to the market to trade.

The truth is, everyone’s circumstances and objectives are different and we can’t determine the best time frame for you. 

YOU need to do the hard work yourself. 

Forex trader

…BUT…

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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 the Forex trader.

In order to get started, you need to answer the following questions.

  1. How much time do you have/want to trade?
  2. How much time do you want your money to be exposed to the markets?

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.

For example, say you have a day job and have a limited amount of time to stay in front of the screens, you may be looking at trading on the higher time periods, maybe the daily or the monthly time-frames. 

On the other hand, if you have plenty of hours throughout the day to spend in front of the screens looking for those opportunities (scalping). You’re looking to exploit your trading edge over a large number of trades; you might be looking at the minute or hourly charts.

Another very important thing when choosing the best time frame to trade in the Forex market are your objectives. Let’s explore the 3 main objectives below. 

Larger Time Frame

On a larger time frame, you analyse the market at a larger 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.

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 commission to your broker

To do this, though, you will have to master an incredible amount of patience. 

Don’t let the fluctuations drive you nuts. You’ve got to learn to HODL

Shorter Time Frame

On shorter time frame price moves very fast.

Now, if you aspire to become a  short-term (Swing) 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.

Medium Time Frame

The most adventurous of the bunch, the Intraday traders, also known as Scalpers, who trade on M30 time frame, H1 time frame or H4.

The good thing is, you don’t have to sit in front of the computer to watch each and every price movement.

But the price does not move as fast as on the lower time frame, can also be costly, and earnings may not be quite substantial.

Does capital play a role when deciding what time frame to trade?

Yes.

And again, YES but in capitals. 

Forex trading

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.

Psychology behind different time frames

As you already know, psychology plays a huge part in Forex trading. 

Often, it can be the detrimental factor of the 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 short period of time, especially on larger trades. 

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 you leave all that noise to more experienced traders that have a better grip on their emotions and trading psychology. 

After all, trading comes with enough challenges. You don’t have to make it even more difficult for yourself by increasing your emotional involvement on 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 that 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 either. 

Another thing to consider is the actual 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.

Be sure to check out our Trading Room to learn more about these strategies. Our mentors stream live, several times a day where 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!

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