Forex traders fail for many reasons. The most chanted of these reasons is their bad habit of letting their losers run and cutting their winners short. As surprising as that may sound, that still continues to be repeated many times. However, there is a less-talked-about cause of the failure of Forex traders which is not less important.
Maybe it is not just so popular because it is a bit technical. It is their lack of knowledge of the right time frame to trade. And that is especially common among beginners.
So, what is a time frame in Forex trading? Time frame is the specified period in which a Forex trader operates. On most Forex trading platforms, many time frames are made available to use. They range from minutes and hours to days, weeks, and months. While you can decide to trade on multiple time frames, it is important you choose what works best for you.
Time frames are an integral part of charts. Therefore, they aid in the technical analysis of trades. With other tools, you can use them to check price patterns and determine market directions. Candlesticks are especially very useful for this purpose.
Therefore, the time frames can help you in analyzing the market to discover to know when it opens and closes, the highest price it reaches during the day, and the lowest it ever goes. Using time frames this way will help you discover only the top trading signals.
So, out of all the available ones, what is the best time frame to use? Unfortunately, there is no easy answer to that. In fact, answering that question requires some deep analysis and further questioning. There is really a need to consider your circumstances and trading objectives before that question is to be answered.
Are you still keeping your day job? Then, you will be better off using the higher time frames such as the daily and monthly time frames. In fact, since you will not be having enough time to lock your eyes on the screen, the lowest you should ever go as a part-time Forex trader should be the hourly time frame. Anything lower than that will only give you a distorted view of the market, which will not be proper for your needs.
On the other hand, if you want to do Forex trading full-time, you will definitely have enough time to devote to the market. At that, you will be better off using the lower time frames – from the minute to the hourly charts.
The exact trading strategy that you will be using is another important factor that will determine your time frame. If you are going to be a scalper for example, you will be good with the minute time frame since you will must detect only Accurate Forex Trading Signals and enter multiple trades all within a short time.
If you are going to be a day trader, the hourly time frame is fine. For swing trading, you will definitely be doing wrong if you do not stick to the hourly or daily charts. The two time frames will enable you to take more trades per day. However, the fees can easily ramp up because of that. So, you should strive to strike a delicate balance.
If you are going to be a position trader, use the daily, weekly, or monthly time frame. Position trading is long-term. As a result, you will most likely be taking trades far fewer than users of any other strategy will be. Also, the commissions will be manageable. However, to succeed as a position trader, you will need a lot of patience.
Capital is another subtle factor that will determine the time frame that will be best for you. If you will be trading with a small capital, you will have to befriend lower time frames. Also, with a small capital, you will have to be setting tight stops.
On the other hand, a large capital requires bigger stops and higher time frames. Hence, consider the size of your capital and other factors discussed before choosing the best time frame for you.
Psychology is a huge aspect of Forex trading. The kind of strategy you use and your circumstances will also determine many aspects of your trading, and one of those things is the time frame you should use. However, trading on low time frames magnifies negative psychological effects. Seeing your trades easily slump into red and money coming in and out of your account can be emotionally devastating. So, be prepared for this.
Otherwise, in order to spare yourself that headache, you can subscribe to our signals at Technical Trading Signals here. They come already made so that you will not have to worry about a thing, the time frame to use included.