When you come to the financial market there is a lot of choice when deciding on what time frame to trade, you can trade daily,H4,H1,M30,M15,M5 and 1 minute.
the time frame is simply to the period of time at each individual candlestick you see on the chart,
so if it is daily time frame, each candle refer as 1 full day of price movement if it was a 4 hour time frame, each candle refer 4 hours of price movement, if it was a 5 minutes time frame, each candle worth of 5 minute of price movement ETC.
Most people settle on a time frame without giving it much tough. However, the time frame you trade is an important decision for a trader.
What do you think is the most common timeframe beginners gravitate towards?
In my expereince it is very often the 1 minute timeframe.
that is exactly where i started and from experience of working with lot of student, that is the most common route onto the chart.
the common believe is that because it moves faster than other timeframe, it is more exciting.there is a oppotunity to faster profits and give the true trader experience.
what you tend to find is that the 1 minute timeframe instead destroys trading accounts.
the fast movement and excitement cause emotional trading, mistakes and is very stressful.
i do not suggest you start learning on the 1 minute timeframe.
we need to consider 3 things
- your lifestyle
- your personality
- your situation
For the most part people have other commitments otherside of trading, that can be your job,school, kids or what ever it may be.
you must first consider what works for you and the balancing act that is in your life.
if you want to do day trade but you work every weekday from 9.00 AM until 5.00 PM and have no time for charts.
if you want to trade the 1 hour time frame but can only look at the charts each evening, this may limit your opportunity.
First you have to consider what is possible for you and your lifestyle. if you want to be a day trader can you spare at least a couple of hours at a time to watch the charts?
your lifestyle also ties in with your situation, which we will cover soon.
Being comfortable with the way you trade is a key component of trading success. as you start trading, you soon discover that the timeframe you trade can have a huge impact on your trading psychology.
if the time frame does not suit you, if can lead to mistakes and emotional trading that will cost you money.
some consideration for lower time frame are:
- trade can complete quickly
- you dont need to hold position overnight.
- stops are usually smallers than on higher timeframes, so it can be good for smaller accounts.
however faster trades can mean faster losses, less time to make decisions.
Some consideration for higher timeframe are:
- more time to make decisions.
- Requires less screen time.
- Trades can last weeks/Months.
some drawbacks are a lot of people do not like holding positions long term and find it difficult to ignore the trade.
there can be days and weeks between potential setup.
stops are usually larger and require a larger account.
this mainly comes down to finances. it tends to be the case that the higher the timeframe, the larger the stop size, as stop size increases, so does your minimum risk.
if you have a 10 point stop and your broker has a minimum risk of $1 per point, you are risking $10 in a trade. if you are using a 100 point stop, which is common on daily timeframe, you are risking $100 on a single trade.
Now that you have looked at the different factors to consider, i hope you have already concluded that the best time frame to trade.. is the one that suits you. that means your lifestyle, your personality, and your situation.
Lots of people like to declare “X is the only time frame you should be trading” but in reality, there are professional trader trading successfully on all time frames, whatever works for you, is best for you.