Lately, a few beginner traders asked me about the best time frame to use for trading Forex. I will explore this topic in today's blog and I'll teach you how to choose the best Time-Frame for you.
What is a Time-Frame?
In Financial Markets, we look at the course of prices to make an idea of what they will do in the future. And there are three different formats to look at the charts: a candlestick chart, a bar chart and a line chart.
A candlestick chart or bar chart is pretty much the same thing – each candlestick or each bar represents a period of time.
For example, if you analyze a day chart, each candlestick represents price actions in a particular time period. You'll be able to see when the market opened and closed. Usually, if it closes higher than it opens, it'll be coloured in blue or green.
A single candlestick will show all the price action from a day. But when we're trading, we don't have to look at what happened in just one day. We can drill to one minute or even one month.
The 15-minute chart displays the same information as an hour candle but with more details. It depends on you if you want to trade with more detail or you prefer a higher time period.
I will not suggest that one's more profitable than the other because that's not the case. Everyone's personal circumstances and objectives are different. If you have a day job and a limited amount of time to spend in front of the screens you may want to trade in a higher time period such as daily or monthly.
Just keep in mind that – trading off monthly means a few and far between trades to take over the month. On the other hand, you'll have plenty of time throughout the day searching for opportunities.
What is the objective of your trading?
Also, your objective is very important. In case you want to pay your retirement or the school fees, then you should grow your account over a longer period of time. But if your aim is a monthly stable income, you should trade the shorter time periods such as the preferred 1-hour or the 15-minutes charts.
The one thing that all these objectives have in common is the desire to make money. This is why people start trading Forex.
The best Time-Frame to use when trading Forex ?
Personally, I decide which time-frame to use based on one factor – the psychology of trading. We all know that psychology has a huge part in trading. And to be honest, bad psychology is the killer of most trading accounts.
Trading the really short timeframes and seeing money go in and out of the account is emotional. And money is an emotional commodity.
For the beginners in trading, I suggest leaving the shorter periods to the more experienced traders. Trading is challenging enough, so don't increase your emotional involvement on the 15 minutes chart.
Once you proved yourself and your skills as a trader, you should consider to trade the lower time periods.
What strategy to use when trading Forex ?
Of course, you should not forget about the actual strategy.
Here at HowToTrade.co, we trade live various strategies, from the swing trading, day strategy to the five minutes scalping strategy.
It's very important to make sure your strategy is optimized for the particular time period.
I hope you have found this valuable. If you would like to learn more, join me in the Trading Room. I hope to see you there! Happy trading and good luck.