What time frame is best for trading?
Well, just like everything in life, it all depends on YOU.
Do you like to take things slowly, take your time on each trade?
Maybe you’re suited for trading longer time frames.
Or perhaps you like the excitement, quick, fast paced action? Perhaps you should take look at the 5-min charts.
In the table below, we’ve highlighted some of the basic time frames and the differences between each.
|Long-term||Long-term traders will usually refer to daily and weekly charts.
The weekly charts will establish the longer term perspective and assist in placing entries in the shorter term daily.
Trades usually from a few weeks to many months, sometimes years.
|Don’t have to watch the markets intraday.
Fewer transactions mean less times to pay the spread.
More time to think through each trade
|Large swingsUsually 1 or 2 two goods a year so PATIENCE is required.
Bigger account needed to ride longer term swings
Frequent losing months
|Short-term (Swing)||Short-term traders use hourly time frames and hold trades for several hours to a week.||More opportunities for trades.
Less chance of losing months.
Less reliance on one or two trades a year to make money
|Transaction costs will be higher (more spreads to pay).
Overnight risk becomes a factor
|Intraday||Intraday traders use minute charts such as 1-minute or 15-minute.
Trades are held intraday and exited by market close.
|Lots of trading opportunities.
Less chance of losing monthsNo overnight risk
|Transaction costs will be much higher (more spreads to pay).
Mentally more difficult due to the need to change biases frequently.
Profits are limited by needing to exit at the end of the day.
You also have to consider the amount of capital you have to trade.
Shorter time frames allow you to make better use of margin and have tighter stop losses.
Larger time frames require bigger stops, thus a bigger account, so you can handle the market swings without facing a margin call.
The most important thing to remember is that whatever time frame you choose to trade, it should naturally fit your personality.If you feel a little uptight like your undies are loose or your pants are little too short, then maybe it’s just not the right fit.
This is why we suggest demo trading on several time frames for a while to find your comfort zone.
This will help you determine the best fit for you to make the best trading decisions you can.
When you finally decide on your preferred time frame, that’s when the fun begins.
This is when you start looking at multiple time frames to help you analyze the market.