What is the best Time Frame in Forex trading? This is one of the most frequently asked questions.
With all the (misleading) advertisements on Forex trading that we have on the internet, showing traders driving fast cars, at the beach with a beautiful girl, with a stunning house… people start trading the Forex market to get rich quick.
This leads aspiring traders to focus mainly on 1-minute and 5-minute charts.
99% of times, it happens that they lose their money and give up, saying that Forex trading is not for them.
It’s not about Forex trading, it’s about the time frame that you choose. Maybe 1-minute and 5-minute charts don’t fit your personality and you would have better results with a higher time frame.
So how to choose the best time frame for you?
It all comes down to two factors: your trading style and the time you want to dedicate to Forex trading.
How long can you check the Forex market each day?
Most people think that you can’t trade if you only have 10 minutes per day to check the charts. This is not true. You can focus on high time frames, such as the daily or weekly (or monthly if you are not too bored). You want to have a look at the bigger picture on the market, you aim for take profits of hundreds of pips, so it’s useless to check the graph every hour, it’s not going to change that much, you can relax and try to sleep well without thinking too much of your positions. Monitoring the price once per day, for 10 minutes, will be enough with this kind of approach.
This is probably the amount of time that best represents the effort of a new aspiring trader on the Forex market. You have more time to dedicate to your trading, you can also include the 4-hour charts in your plan and probably also the 1-hour time frame will be helpful if you split your trading sessions in more than one. This allows you to widen your choices, you can still be a long-term trader, but you can also opt for a medium-term horizon.
If you constantly dedicate more than two hours to Forex trading, it is all a matter of your trading style. You have enough time to check low time-frames like the 5M or the 15M, but it doesn’t mean that you should go for it.
Not all traders are created equal! If you prefer medium term or long term trades, then it is not forbidden just because you have more time! You can use your time to think more about your positions or to monitor if something changed on the market.
What is your trading style?
Scalpers hold their positions for a few seconds to a few minutes. The main objective of this trading style is to “steal” a very small amount of pips from the market. Scalpers focus on very low time frames, such as 1-minute and 5-minute.
This technique is a double-edged sword, you can make money in a few seconds, but you can also lose money in a few seconds! I wouldn’t suggest to be a scalper, especially if you are starting your trading journey now. If you decide to go for it, the best advice I can give you is to choose a very good Broker, possibly an ECN and not a market maker. I’m going a bit off-topic here, but you can check this out: What Forex Brokers Can Be Trusted?
Day traders focus on short and medium term trading. Usually they don’t hold the position for more than one day. The most popular time frames for this trading style are 15M and H1. If you are a kind of trader who doesn’t like the crazy, fast action of scalpers, but you are also impatient to wait days or weeks to get your money (or to give your money to your broker!), this trading style may suit you.
Usually this category is also sub-divided in swing traders and position traders, but we will consider only the category of long-term traders for the sake of simplicity. If you like to hold your positions for days or weeks, this is the trading style for you. Swing traders usually focus on 4-hour or D1 time frame, while position traders give more importance to D1 and W1 charts.
My last advice is to analyze the daily chart even if you are planning to trade on a shorter time frame. Daily charts can be used to keep an eye on the market’s overall direction. They say that trend is your friend, so seeing the bigger picture on the daily chart can help you to trade on lower time frames in the same direction of the prevailing trend.