If there was ever a question that has more answers than there are upticks in a bull market, it’s ‘what’s the best timeframe for trading the Forex market?’
Because every trader is different and each have their own personality traits, it’s imperative to find a strategy or trading style that fits you.
One of the toughest realisations is determining what timeframe you’ll be trading. You see, some people need the excitement of making multiple trades a day, whereas others are completely fine holding a single trade for a number of days or even weeks.
The simple answer is to choosing the right timeframe is to evaluate the available time you’re wanting to spend in front of the screen and to experiment. I know that’s not very helpful, so let’s dive in a bit deeper.
What time frames are there?
First things first. For the sake of this article, let’s assume that we’re all using MetaTrader 4 as our platform, which includes 9 standard timeframes:
Even with these standard timeframes, there are plenty of options available. Some platforms outside of MT4 offer more, but these are the most commonly traded timeframes and if you ask me, you don’t need any others.
Why? Because you don’t need every single time interval to trade what price is doing. If the common timeframes are as the term suggests, commonly traded, then important price levels are evident on (yep, you guessed it) the common timeframes. When you choose to stray from the most watched timeframes, these levels are less clear because there are less participants creating/trading them.
Why I trade the Higher Timeframes
Personally, my preference is trading the 4 hour and daily charts. This doesn’t mean that trading shorter timeframes don’t work, but it just suits me better.
Why? Well, when you’re trading a higher timeframe you don’t get as influenced or shaken around by news. I also find that it’s much easier to determine the direction of the market. And, because I don’t like to sit in front of my trading platform all day and night, it also means my frequency of trading is lower and it forces me to focus more on quality than quantity.
There are however, some common (misconceived) drawbacks to trading the higher timeframes. Many people think that they can’t afford the wider stop loss with a minimum deposit of say $100.
Even with a small account, if the wider stop loss is causing you psychological grief, then chances are you trading too large a position. Now, without a doubt it’s much harder to turn that first $100 into $1000 than it is to turn $10K into $100K, but the reason is because you’re always tempted to trade a greater risk than you should in order to get there faster. But this is irrespective of the timeframe traded.
Another thing many people don’t like about trading higher timeframes is that it’s “boring”. Honestly, this response always annoys me… does making money bore you? Really?
You need to focus on what you want out of Forex trading as well as your personal circumstances. For example, you may have already have a full time job and want to trade to build a bit of extra capital, or perhaps you want to trade full time in which case you’ll need to supplement income. Either way, trading isn’t a thrill ride, it’s a business and should be treated as such.
Source: Vantage FX Blog