Timeframes In Forex Trading

Timeframes In Forex Trading

A timeframe in trading means a period in which trading takes place, which is then represented on a price chart.

Even though the instrument stays the same, each timeframe has a different look and gives a different perspective on the market.

Take a look at EURUSD below. The timeframe chosen determines the high, low, open, close, and frequency of the candlesticks i.e. each chart looks different even though the instrument and prices are the same.

 

4 Hour Chart

(Source – TradingView)

 

Daily

(Source – TradingView)

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What are the most popular trading timeframes?

  • Monthly
  • Weekly
  • Daily
  • H4
  • H1
  • 30 min
  • 15 min
  • 5 min
  • 1 min

 

Although there are many other options, I suggest sticking to these. But why?

Because if many market participants (especially institutional traders) don’t use a timeframe, the patterns, support/ resistance zones, trendlines, indicators, and confluence are insignificant because these will not be met with the necessary buying or selling power.

Money is required to move markets. If there isn’t enough money analyzing your chosen timeframe, then your results will be poor.

What is the best timeframe to trade?

I won’t lie and give you one universal option that is best for everyone because there isn’t one. There is only an optimal timeframe for you.

Here are some questions to guide your decision making:

 

How often do you check the charts?

Should most of your day be occupied by studies or your job, you cannot be in front of the charts constantly.

When you finally get a chance to trade, you need to execute on a timeframe that suits your schedule.

For example, if you check the market twice a day, you shouldn’t be trading on the 5 Minute Chart. That is a ticket to failure. Instead, switch to the daily timeframe.

To summarize, make sure your timeframe is aligned with the amount of attention you can give to the market.

 

What is your holding time?

Scalpers have short holding periods, which suits timeframes like the 1 Minute, 5 Minute, and 15 Minute.

Swing traders will generally have positions open for a few days to a few weeks, the 1 Hour and 4 Hour timeframes are great options.

Long-term traders leave trades open for months to years, which means the Daily and Weekly charts are the places to be.

 

How do you analyze the market?

Your trading approach also influences the timeframe you should use because the market will only support your bias for a certain time. Here are some examples:

  • Fundamental analysis usually takes a while to work (larger timeframes are best).
  • News event trading takes advantage of the initial reaction (smaller timeframes are best).
  • Technical analysis works on all timeframes, but larger timeframes are more reliable.

 

After considering all these, you should have a guide on what complements your trading.

Should you have a few timeframes in mind and don’t know what to chose, backtest and pick the most profitable option.

If you are a complete newbie and don’t have answers to these questions yet, an excellent place to start is the 4 Hour timeframe. It is frequent enough for you to gain experience without the need to stare at screens the entire day.

Multiple Timeframe Analysis

Using multiple timeframes means analyzing a currency pair over different periods to determine the trend, entry, and exit points.

Here is how to use multiple timeframe analysis:

  1. Use your highest timeframe to identify the market environment.
  2. Draw your technical analysis tools on your middle timeframe.
  3. Execute trades, set stop loss orders, and take profits on your lowest timeframe.

 

Trend identification

(Source – TradingView)

 

Analysis

(Source – TradingView)

 

Execution

(Source – TradingView)

 

The key is to start with the larger timeframe and work your way down. Shorter periods are for execution, not to dictate your bias.

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Benefits of using multiple timeframes

  • You can always trade along with the bigger picture trend.
  • Eliminate false signals by seeing the context of patterns.
  • Can enter with tight risk but excellent reward.

Conclusion

Now it’s time for you to put in the hard yards. Consider everything we have discussed, guide your decision-making with questions, and test to find the most profitable way.

Side note – Make sure that your trading platform offers all the major timeframes. Check out MetaTrader, TradingView, and Plus500.

If you found this guide helpful, share it with a fellow trader so they can grow too.

Timeframes FAQ

A timeframe in trading means a period in which trading takes place, which is then represented on a price chart.

  • Monthly
  • Weekly
  • Daily
  • H4
  • H1
  • 30 min
  • 15 min
  • 5 min
  • 1 min

For scalpers, the 1 Minute, 5 Minute, and 15 Minute charts.
For swing traders, the 1 Hour and 4 Hour timeframes are great options.
For long-term traders, the Daily and Weekly charts are the places to be.

Using multiple timeframes means analyzing a currency pair over different periods to determine the trend, entry, and exit points.

  1. Determine the market environment on your highest timeframe.
  2. Plot your technical analysis tools on your middle timeframe.
  3. Execute trades, set SL and TP on your lowest timeframe.
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Guy Seynaeve

Guy Seynaeve

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