Trading multiple time frames are very common in forex trading. Using multiple time frames analysis is considered to be a major helping tool in assessing currency trends over a certain period of time. However, traders can have different opinions about a pair’s trend on different multiple frames, and each can be completely right.
And the reason why trading platforms offer so many time frames is because of the diversity of market traders.
How Can Multiple Time Frames Analysis be Helpful?
Checking multiple time frames gives you different perspectives of the currency’s price, direction, and momentum. It helps you spotting support and resistance areas easily and predict trend changes. You also may need to check multiple time frames in order to set entry or exit levels for your trade. It is the best method to see the small, medium, and big picture before making your decision.
Which Time Frame Should I Trade?
Choosing the wrong time frame, that doesn’t fit your trading strategy or personality, can be one of the biggest mistakes. Newbie forex traders always rush to smaller time frames only for quick profits. Most of the time this ends up with losses and frustration.
Between daily, weekly and monthly charts, what suits you best? Well, it depends on your personality. Pick the time frame you’re comfortable with. Use a weekly frame if you think that daily is too rushed, and trade the 1-hour frame if you think that larger frames are too long for you.
So, if you are a beginner, you may take it slowly. Try shorter time frames, 15-minute for example, and then use 1-hour, 4-hour, daily, weekly frames until you find your comfort zone. None of them is wrong, it’s your call.
Choosing the Best Time Frame for Trading
If you prefer fast-past trading, you’d better go for short time frames. But if you like to take things slowly, then longer time frames will suit you better. Let’s have a quick look at the pros and cons of different trading time frames.
It depends on using very short time frames; 1 to 15-minute charts. Traders in this category open and close their trades on a daily basis. This method offers some advantages including the diversity of trading opportunities and lesser exposure to movement risks. However, this trading style usually costs more due to the paid spread for every trade. Also, it needs your full attention and continuous monitoring which can be mentally difficult. Profits here are limited today end.
Short Term or Swing Trading
This style uses hourly charts for trading and trades can behold for hours, days to a week. Same as day trading, it offers many trading opportunities. Transaction costs can also be higher as well, and trades are exposed to overnight interest.
Long Term Trading
Trades here can be hold for weeks or months as it is depending on a long-term perspective. Usually daily to weekly charts are being used for analysis. It is a style that gains you peace of mind literally, as you don’t have to check every day. But you have to be patient here, because trades may take a very long time. Despite the fact that you pay lower spreads, you need to have a bigger account to ride price swings.
Have you chosen yet?
Now that you know the difference between time frames, you can decide your favorite one. Remember, it’s completely up to you. Choose what is comfortable, yet profitable for you.