Why You Should Look at Multiple Time Frames When Trading
Forex
Before we explain how to do multiple time frame analysis for
your forex trading, we feel that it’s necessary to point out why you should
actually flip through the different time frames.
After all, isn’t it hard enough analyzing just one chart as
a forex trader?
You’ve got a billion indicators on, you’ve gotta read up on
economic news, you’ve got basketball practice, a Call of Duty session, a hot
date at McDonald’s…
Well, let’s play a game called “Long or Short” to show why
you should be paying attention and putting in the extra effort to look at
different time frames.
The rules of the game are easy. You look at a chart and you
decide whether to go long or short. Easy, right? Okay, ready?
Let’s take a look at the 10 minute chart of GBP/USD on July
1, 2010 (7/01/2010) at 8:00 am GMT.
We’ve got the 200 simple moving average on,
which appears to be holding as resistance.
With price testing the resistance and forming a doji, it
seems like a good time to short right?
We’ll take that as a yes.
"Worry is wasting today’s time cluttering up tomorrow’s
opportunities with yesterday’s troubles.”
By Unknown Author.
"Your work is to discover your work and then with all
your heart to give yourself to it.”
By Buddha.
"Hold up your head! You were not made for failure. You
were made for victory. Go forward with a joyful confidence."
By George Eliot.
What Time Frame Is
Best for Trading? (Part 2)
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.
"The more chance there is of stubbing your toe, the
more chance you have of stepping into success."
By Unknown Author.
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.
"Change the changeable, accept the unchangeable, and
remove yourself from the unacceptable.”
By Denis Waitley.
"Every success is built on the ability to do better
than good enouigh."
By Unknown Author.
What Time Frame
Should I Trade? (Part 2)
Well buddy, if you
had been paying attention, it depends on your personality. You have to feel
comfortable with the time frame you’re trading in.
You’ll always feel
some kind of pressure or sense of frustration when you’re in a trade because
real money is involved. That’s natural.
But you shouldn’t
feel that the reason for the pressure is because things are happening so fast
that you find it difficult to make decisions or so slowly that you get
frustrated.
When we first
started trading, we couldn’t stick to a time frame.
We started with the
15-minute chart.
Then the 5-minute
chart.
Then we tried the
1-hour chart, the daily chart, and the 4-hour chart.
This is natural for
all new forex traders until you find your comfort zone and why we suggest that
you DEMO trade using different time frames to see which fits your personality
the best.
"The ones who say “you can’t” and “you won’t” are
probably the ones scared that “you will”."
By Billy Cox.
"Try not to become a person of success, but rather try
to become a person of value."
By Albert Einstein.
What Time Frame
Should I Trade?
One of the reasons
newbie forex traders don’t do as well as they should is because they’re usually
trading the wrong time frame for their personality.
New forex traders
will want to get rich quick so they’ll start trading small time frames like the
1-minute or 5-minute charts. Then they end up getting frustrated when they
trade because the time frame doesn’t fit their personality.
For some forex
traders, they feel most comfortable trading the 1-hour charts.
This time frame is
longer, but not too long, and trade signals are fewer, but not too few. Trading
on this time frame helps give more time to analyze the market and not feel so
rushed.
On the other hand,
we have a friend who could never, ever, trade in a 1-hour time frame.
It would be way too
slow for him and he’d probably think he was going to rot and die before he
could get in a trade. He prefers trading a 10-minute chart. It still gives him
enough time (but not too much) to make decisions based on his trading plan.
Another buddy of
ours can’t figure out how forex traders trade on a 1-hour chart because he
thinks it’s too fast! He trades only daily, weekly, and monthly charts.
Okay, so you’re
probably asking what the right time frame is for you.
"What you release into the world is donated back to you."
By Robin Sharma.
