New traders always want to know which time frame is the best for them to use for trading. It makes sense that people would want to know about this. After all, the more that we know about which timeframes we should use for trading, the better off we will be in terms of selecting how to trade properly on those frames.
The good news is that a lot of the choice of which timeframe works best comes down to who you are as a person. Check out the table below to see what some of the different timeframes are used for by typical Forex traders:
It is also extremely important to think about the amount of capital that you have available to trade. If the amount that you have available is limited, then you might want to trade in a shorter timeframe. This is because the longer timeframes require you to have wider stops on your trades, and that means you will need more capital in order to facilitate those trades.
Thus, you will need to think carefully about how much you are willing to commit to any given trade. The timeframes that you ultimately decide to use will largely come down to how much you can afford to spend and also how much patience you have with the market.
This is to say that you need to be prepared for the fact that you may have to wait some time before some of your trades are able to come to bear fruit for you. This is incredibly important to remember because you need to make sure you are trading in the right frame for yourself.
It is best to practice your trading strategies on a demo account until such time that you are fully confident in your strategies and in your ability to trade on the timeframes that you need to trade on. If that is not the case, then you need to keep working on it until you get to the point where you are fully confident in your abilities with any given trade.
All of this will certainly take you some time to figure out, but you can do it. Just make sure you keep working on the demo until you have complete confidence in your abilities. Otherwise, you may put too much money at risk when you are still not fully confident in your abilities as a trader.
Why You Should Look at Multiple Time Frames
Use multiple timeframes to get the bigger picture and zoom in a bit. Period. You should be mashing up the various timeframes that you use to make your best trades. You need to take a look not only at your preferred trading timeframe but also at the best way to move in and out of different charts in order to find the best winning trades for yourself.
The more that you practice at this, the easier it will become and the better you will get at it. If you are ready to begin, we can start to teach you a few of the basics about how to best use the different charts that you are dealing with.
The first thing you will want to do is take as broad of a look at the market as you possibly can. Why? Because you need to be sure that you are seeing the entire picture for what it is worth. This is to say that you cannot assume that whatever slice of the market you happen to be viewing on a smaller timeframe is giving you the full picture that you need to understand what is really going on in the market.
Longer Timeframes
A big part of the reason why longer timeframes are so important is that the longer the time frame, the more effort it takes to move the market.
This means that the moves are more genuine and stronger as a whole. In addition to this, support and resistance levels are sturdy on longer timeframes. As such, you can better trust the results that you get by looking at a longer timeframe than you might from a shorter one.
It may be necessary for you to make some strategic decisions about entries and exits based on which charts you are looking at and how they correspond with the market movements that you witness at any given time.
Don’t allow yourself to get duped into thinking that a market movement on a short timeframe is truly the overall course of the market as a whole. That may not be the case at all, and you might miss out on some significant moves if you stick by this belief.
Multiple Timeframe Analysis
It will be necessary for you to perform multiple timeframe analysis in order to find the best spots to place your trades. This is to say that you will want to be sure that you are examining how the market is reacting to various indicators and news as it comes out.
When you look at all of that information carefully, you can better figure out where you want to place your trades and how you can execute those trades to your best ability.
You may want to first start by examining the 4-hour chart of any given currency pair that you are looking at.
Here’s why. In the below 15-minute chart, price seems to be holding nicely at the 200 SMA level. You may think this entry is a great spot to go long.
But wait… What happened? Price blew through the well-established 200 SMA support zone.
If you’d looked at the 4-hour chart, you’d have seen that price was simply bouncing off of the newly-created trend channel.
By combining your review of both of these charts in your analysis, you can more easily see how they play off of each other and how it is possible for you to profit from the use of both types of charts no matter what. Look for trends in the longer timeframe charts to figure out which way you believe the market is moving. Then, make sure you look for the best entry and exit points on a shorter timeframe chart in order to make the most of your analysis of both sides of the coin.
You do NOT want to put yourself in a position where you are trading off faulty information.
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