Which time frame to trade on

Before reading through this lesson, you should have previously read through:

The video player is loading...

The difference between time frames

Japanese candlesticks: an introduction to the idea that a price chart is always shown on a particular time frame. This can range from as low as a 1 minute chart, where the candle is formed every minute, to monthly charts where the candle forms once every month.

What is a time frame? A time frame is a specified period of time during which price action is displayed on a chart. With Japanese candlesticks, each candle lasts for the specified period of time.

It is important to stress that when you set a particular time period on your chart, it does not show the price over that time period. Rather, each individual candle takes that specified time to form.

For example, a five minute time frame does not show the price action over 5 minutes, but rather each individual candle on the price chart takes five minutes to form.

When looking at a price chart, a larger time frame, such as weekly chart, will show the price range over the course of a number of months, but each candle will take a day or a week to form.

Weekly chart example Show chart

Smaller time frames, such as the 5 minute chart, show the price action over a much shorter range, but each candle takes five minutes to form:

5 minute chart example Show chart

Definitions of different time frames

Opinions differ on what defines a short-term time frame and a long-term time frame.

However, a good place to start in order to differentiate between different time frames is to consider that anything below an hourly time frame can be considered short-term; anything below a daily time frame can be considered medium-term; and anything that is daily and above can be considered long-term.

Typically, when choosing a time frame, anything below hourly can be considered short-term; anything below daily is medium-term; anything daily and above is long-term. A trader should choose a time frame that suits their personality – no two traders are alike.

Choosing a time frame

A trader does not need to monitor every single time frame in order to be successful. A time frame should match the personality of a trader because there are different disciplines and techniques for different time frames. Someone with a lot of patience that prefers to trade the markets without high volatility may prefer trading on higher time frames. Someone who prefers to trade frequently with heightened market activity may prefer a shorter term time frame. No two traders are alike and a trader should choose the time frame that suits them best.

Short-term time frames

Time frame short term

The duration of short-term trades generally lasts from several seconds to a couple of hours at most.

Scalping

A method in which a trader monitors a short-term time frame closely and enters and exits in a matter of seconds is known as scalping. The main objective is to make small but frequent trades.

There are several considerations that should be taken into account when choosing scalping as a trading method:

A method in which a trader monitors a short-term time frame closely and enters and exits in a matter of seconds is known as scalping.

  • Scalping is very fast paced and requires a significant amount of attention throughout the day to find and take trades.
  • Complete attention is also required throughout the trade from open to close.
  • Scalping requires active market sessions. This is most frequently during the London and New York sessions.
  • It can be stressful and requires discipline to continually stick to a scalping system.

It is important to note that scalping does not guarantee a trader positive returns just because potential profits can be made quickly.

Day trading/Intraday trading

As the name suggests, day trading is a method where orders are opened and closed within a single day and the position is not carried overnight. Trading can take place in five minutes, fifteen minutes, hourly etc. However, day trading usually results in a few trades per day.

Day trading is when orders are opened and closed within a single day. It does not rely as heavily on fast price action, such as scalping.

It does not rely as heavily on fast price action, such as scalping. The following aspects belong to day trading and should be considered before choosing it as a preferred method:

  • This method is slower than scalping, but not as long as other longer term types of trading, where you could wait for days or even weeks to find an entry.
  • A day trader should keep an eye on relevant economical developments as these can change the market conditions throughout the day.

Looking for a mentor?

Matthias from our Tradimo Premium team will design a learning plan tailored to you that gives you access to new courses and live webinars every month as well as priority private email support.

Order our Tradimo Premium Service now

Medium-term time frames

Time frame medium term

On medium-term time frames, a trader will watch four-hour or daily charts and will attempt to look at the overall picture, while potentially only finding a few trades per week.

Swing trading

A swing trader is a medium-term trader who may look at a daily chart to see underlying trends and decide on specific trades based on, say, a four-hour chart. Positions are generally held from a day to a few days.

Swing trading is done on a medium-term time frame and a swing trader may look at a daily chart to see underlying trends. Positions are usually held from a day to a few days. Stop losses and profit targets are also generally higher.

With swing trading, stop losses and profit targets are generally higher. A swing trader needs patience and discipline to wait until the price reaches their take profit or stop loss orders.

Swing trading would suit those who:

  • Cannot monitor the market every day, but can dedicate at least some time to market analysis for finding entries.
  • Are patient in waiting for the correct entries, which may mean only trading a few times per week.
  • They trust their trading plan and do not change it every time there is an adverse price fluctuation.

A benefit of swing trading is that with larger targets, spreads have little impact. For example, a 3 pip spread is very affordable when projected profits are 50-100 pips. This also means that as a swing trader, you have a wider choice of currency pairs, including those that are less liquid with wider spreads.

Long-term trading

Time frame long term

A long-term trader waits patiently for opportunities. The trades can be rare and are usually held for long periods of time – sometimes weeks, months or even longer.

Position trading

The method where daily, weekly and monthly charts are predominantly used is called position trading. Fundamental analysis can play a key role in making trading decisions because economic conditions may change over the time for which a trade is open.

Considerations when choosing a time frame
  • Personal requirements for trading
  • The time available to trade
  • Personality type

However, technical analysis is extremely reliable on long-term position trading because many traders that trade large amounts of money use technical analysis to enter and exit trades, including financial institutions, commercial and central banks.

Position trading would suit traders who have:

  • A lot of patience to enter and exit a trade.
  • Discipline to refrain from changing the initial plan and are prepared for big price swings.
  • Larger starting capital because a long-term trading account generally has to be able to withstand larger losses.

Summary

So far, you have learned that ...

  • ... there are many different time frames to choose from and which type of trading will depend on the trader’s personality.
  • ... short-term time frames are commonly considered to be less than one hour.
  • ... day trading is another short-term approach in which trades last less than 24 hours.
  • ... medium-term time frames are one hour to daily time frames for swing trading, a method that requires less time analysing charts, but more patience and larger profit and loss projections.
  • ... long-term time frames can be considered to be daily, weekly or monthly, where position traders wait to take a trade that is likely to last for a long time.

Looking for a Top Broker? Sign up through Tradimo & get extra benefits!

eToro Plus500 Markets.com FXFlat

See all top brokers


  • Hi,
    The beginner strategy is trade based on 5M chart with refer to 30M chart. Is that okay if on 30M chart refer to 1H chart?
    Thanks.
  • No, if you execute on the 30 min chart, you need to take you direction from the 4 hour chart because you need at least 4 times in between time frames.

    You should check our Multiple time frame analysis if you would like to learn about this in more depth.
  • Hi Dean,
    May you explain the reason that tradimo.com recommend beginner to trade on M5 and not M30? I noticed that M5 can take any time from 15 minutes up to 2 hours or longer for waiting trading opportunity. how about on M30?
  • Hi,

    beginner strategy was created to be used particulary on M5 with determining market direction on M30, because these two time frames are quick enough, so you can experience markets in more dynamic way (with poker player`s passion for action in mind so to say biggrin ).

    But you should do whatever suits you, if you want to trade on higher timeframes, you can do so, of course in trading the last decision is always yours. smile
  • May I what exactly constitute fundamental analysis?
  • Hey yongchunpower,

    I'm so sorry, but I don't think that I understand your question. Fundamental analysis is anything where you study, say, the economics of a country to make a trading decision as opposed to looking at a price chart only.

    So if you are a fundamental trader then you would be looking at things in the economy as a whole.


    ----
    edit by Branjo: Links were not working. Fixed.
  • Thanks for your reply. I think I heard the term in this video here and I realized the articles here are mainly technical analysis and none on fundamental analysis yet. Initially I thought it was something about fundamentals of forex =P
  • Hi yongchunpower,

    If you want to know more about the impact of fundamentals on forex, I recommendyou to check Jack´s blog called Daily Economic Events. It´s not very lively right know, because of holidays, but you can find interesting information of how economic events affect different currencies, and discuss it with Jack and other traders. wink

    Have a nice day!
  • Hi everyone...
    what is the suitable/ best indicator for medium timeframe? I cant choose the suitable indicator. Please help me. smile
  • it was clear and helpful, ty wink
  • Which time frame is good to focusing smaller time frame.
  • Hi Egbewola,
    It is hard to answer as it depends on a variety of things such as the strategy, your availability, personality etc. For exmaple the Beginner Strategy utilizes the 30m and the 5m. AlexFX, one of our experts trading the same strategy also looks at the 4H and sometimes daily charts as well. You can watch his videos here. Also some traders when using multiple time frames they aim to consider the time frames that roughly relate to as other as 4:1, like 4 H and 1H or 1H and 15m and so on. Have a look at the different variations and experiment yourself. Good luck!
    Hindsighthero
  • Regarding swing trading, and when a position is held for a few days:

    1) Could it become a risky trade when there is a big opening gap against the trading direction? how a trading strategy / trader usually deals with this in swing trading?

    2) Some setups for swing trading strategies use 200 pips SL and 20 TP. Another setups use even 2000 SL and 200 TP. This is 10:1 risk R/R ! Is this not too risky and against the recommendations of 1:2 R/R ?

    3) Will rollover fees be calculated automatically by MT4 (based on interbank interest rates) ?


    Thanks in advance!
  • Hi fx18,
    Let me try to answer your questions, hope others will share their views as well...
    1) Not necessarily, sometimes gaps open only for price to reverse in the opposite direction and even continue further. Even gaps are subject to support & resistance in my opinion. Test it on a few examples to see how it works for you...

    2) I would never try a strategy where the risk-to-reward is negative let alone where you have to risk 10X what you expect to gain. That is a sure way to lose your account!

    3) Rollover is calculated and added/deducted by the broker and displayed in your account statement and mt4.

    hope i have been helpful.
    Peter
  • Hello fx18,

    1) Hard to say in a general way how to trade gaps. It depends when/where it happens in the actual trend, and others indications are to be considered too before ruling on such a situation. If all green lights are on despite the opening gap, it could be a good opportunity to enter the trend. Its an idea like another, and I consider it no more riskier than another one. Try your(s) strategy(ies) on past data by focusing on gaps and try to find how you could and if you could trade them profitably.

    2) "Everyone has their own way of doing things" but personally, I can't imagine trade with such a risk on each position. Definitely. I am already quite disturbed when I'm facing ideas with a R/R lower than 1:2, so imagine me in such a situation with R/R of 10:1. After having say that, if you success to find a system that gives you more 95% winning trades, why not? smile

    Happy trading!
    Sebastien
  • Many thanks Peter & Sebastien!
  • Hello, just want to know. Can "beginners strategy" be used in medium and long-term timeframe?
  • Hi Fresco,
    potentially can, but it has been optimized on the 30m and 5m time frame. You definitely need to test it and make adjustments if necessary! For specifically higher time frame strategies check out courses like Stop Hunt, Base Trade, Zone Trade:
    http://en.tradimo.com/learn/courses/
    Regards.
    Peter
  • Am I right to think that forex trading only makes sense in short or maybe medium time-frames?
    Rare events apart (remember the sterling collapse?), the exchange rates remain approximately the same over very long periods, so there is little profit to be made by position trading, right?

Register Now - It's free!

By clicking on the "Get instant access" button, you agree that you have read, understood, and accepted the Terms & Conditions.
Or