Forex Trading Timeframes
What Are Forex Trading Timeframes
When it comes to forex trading, these timeframes have significant importance, and you must understand that there are different timeframes. Timeframes are composed of different summaries of price action defined by time.
The longer the timeframe, the slower the chart moves but the bigger the picture you see. Whereas the shorter the timeframe, the quicker the chart moves but you see far less of the market.
Larger timeframes are used by investors who don’t care for the daily market movements and are happy because they base their analysis over a longer period of time. These traders are looking to capture hundreds to thousands of pips per trade.
Whereas small timeframe users are purely into trading the market price movements. Commonly using just technical analysis. These types of traders are looking to capture anything from 1-10 pips to up 100 pips a time.
You can select any timeframe that suits you, tick by tick, 5 minute, 1 hour, 4 hours, 1 day or even 1 month. Each will tell you a different story and each will either add confluence to your trading tools and help eliminate bad trades.
Please beware, as there are hundreds of thousands of traders, there is no best timeframe – it’s just what you are most comfortable with and your investment goals.
it is hugely important that you understand what different time frames can mean. This will also shape you into what type of trader/investor you are.
Ever heard the expression – “always look at the bigger picture”?
Well, different timeframes are one of the best possible examples of what that expression means.
You are free to choose what timeframe you desire to use as this is purely based on preference. The general rule of thumb is:
The higher the timeframe, the bigger the trade move can be.
Let us explain that further.
If you trade in a 15-minute window, you will only see chart patterns/indicators in a 15-minute timeframe – this can be powerful, but as a trader, you must be aware that there could be a much bigger trend occurring in a higher timeframe.
This is called Timeframe Analysis, something we cover in our Framework to provider entry points to the market.
Same-asset, different timeframes:
5-minute timeframe shows the EURUSD is moving down
1-hour timeframe shows us the EURUSD is rising
1-day timeframe shows us the EURUSD is moving down
This is down to preference.
5 minute to 1-hour timeframes
The idea for traders who want to take small chunks out of the market each day. These timeframes are the fastest moving and allow for more trading ideas to be generated. However, just as easily the lower timeframes also generate false positive trading ideas too.
Exposure to Market Data: Maximum
Any high impact news during the day can completely turn the market against you.
1 hour to 4-hour timeframes
The 1 hour to 4-hour timeframes is ideal for swing traders as they are looking to capture trends within a trend, or swings/pivots in the market. The 1 hour to 4-hour timeframes give clearer signals and allows traders to generate trading ideas based over a few hours to a few days.
Exposure to Market Data: Medium
Any high impact news during the periods will get priced in and less likely to stop you out
4 hour to weekly timeframes
These timeframes offer the least amount of trading noise as most data is priced in. You will be looking to hold a position for a few weeks to months. Highest accuracy with regards to market signals generated but they come few and often. In these timeframes, you can capture huge market moves and beginnings of market trends.
Exposure to Market Data: Minimal
All data will be priced in.