There is no perfect timeframe. There is a chart type for each trading style, strategy, and even personality. If you don’t have an experienced trader on hand to help you with the choice, you can do it yourself by objectively answering several questions.
What are the Timeframes in Forex Trading?
The timeframe is the period used to group price quotes and to build the chart elements that display the price movements. Timeframes are usually measured in seconds, minutes, hours, days, and weeks. Newbies often do not know which frame is the best for their personality and trade 1-minute or 5-minute charts, which may be too fast for inexperienced traders. I strongly recommend testing various timeframes on the demo account first, and only after that, start trading real money.
There are two best ways to choose the right timeframe:
1. Trial and Error
As the name suggests, you need to try different timeframes until you find the right one. To understand whether the chart is right for you, ask yourself the following questions:
- How fast is the price moving on this timeframe? Let's say you trade on EUR/USD. If you manage to analyze the market, enter a trade at the chosen price and the chart reaches your Take Profit within an acceptable period, then you are probably on the right timeframe. When the price moves faster than you are analyzing the market, then the timeframe is too low. If it seems that it takes forever for the price to reach the Take Profit, then the timeframe is too high.
- How much time are you willing to spend on trading? Low timeframes require more attention. If all of your positions are closed without your participation before you manage to check them, choose a higher timeframe. If you have enough time for trading, you can use a lower timeframe. It will offer you a lot more trading opportunities.
Trial and error method is time consuming. It can take several weeks to test each timeframe. If you are interested in a faster way, use the next method.
2. Identity Verification
Each timeframe requires its own level of perseverance and passion, as well as a certain amount of time and attention. Before choosing the right chart, ask yourself a few questions and be honest with yourself:
- Do you like action? Some traders want to open a trade and forget about it for the whole day. They should use high timeframes from 4-hour and higher. Others prefer more activity and like to watch the price change quickly. It is better for such traders to trade on lower timeframes.
- Are you a patient person? This question is related to the previous one. Some people are simply unable to keep a trade open all day long. If you are impatient, then lower timeframes are better for you.
- How much free time do you have? Low time frames require constant tracking. If you can’t check your trades several times a day, then it is better to trade on higher timeframes.
It becomes clear that patient people who prefer to spend as little time trading as possible and check their trades only once a day should trade on high timeframes. Fans of active actions with a large margin of time and enthusiasm can earn on charts from hourly and above.
You can also choose the appropriate timeframe depending on your trading style. If you have already decided on the style, then in the next article I will tell you which chart is best for you. See ya!