What Time-Frame Should You Trade?
Hey Traders!
One of the reason new traders don't do as well as what they first perceived is sometimes they could be trading a multitude of different things in the wrong style. That doesn't suit the way they are attempting to attack the market, or even their personality.
Today I wanted to have a look into trading the different time frames, what's required? What are the pros and what the cons of each time frame? Now there's a million different ways to trade the financial markets. The time frame you're trading is one of the most important. I wanted to jump in and provide clarity for some of the newer traders that perhaps are trading the wrong market based on what they are actually trying to achieve. I see a lot of people coming into the market to earn profits (obviously) and they come in because they want time freedom, yet they all seem to gravitate towards the scalping one minute, 5 minute and 15 minute charts, which are not going to provide time freedom even when you are successful.
I understand the adrenaline pumping in the intraday setups and then it can help people have and feed that get rich quick feeling that gravitates so many people to the market. But it's time we take it seriously. Let's seriously dive into the pros and the cons and analyze what's actually going to benefit you as a trader moving forward.
INTRADAY
Intraday trading is definitely the most frequent out of all the traders that come into the Forex market. The Forex market advertises intraday trading a lot more because the commissions and spreads are extremely affordable compared to trading other markets. Intraday traders, also known as scalpers, trade the markets on the lower timeframes, usually between the one minute and 15 minute, and trades are held throughout a day session and usually closed by the end of the day. You usually see these traders have your typical eight or nine hour window in which they sit in front of the charts and trade.
There's plenty of pros to intraday trading the high frequency of trades, the great adrenaline pumping feeling, the more opportunities across a range of different markets, you hold no overnight risk and it's very easy to dodge fundamental news. You also less reliant on those one or two big winners to bring in your yearly profits.
In saying that, there's also plenty of cons. Transaction costs are much higher when you're scalping. You have to incorporate spreads and commissions can sometimes eat up your profits. Mentally an emotionally, it is an extremely difficult task. You have to be able to be disciplined enough to make quick reaction decisions with money and risk on the line. As mentioned above, unlike the other trading systems and timeframes, it does require quite a lot of time and concentration throughout a trading session, which is why if you're chasing time freedom, I wouldn't recommend intraday trading.
SWING
Swing trading is a common way of trading, as a lot of people are able to do it part time away from whatever their main career. Swing traders trade the markets on a mid-range time frame, usually between the one hour to the four hour chart (sometimes going a little bit above). Trades are held for hours to a week and they try to profit from the larger moves in the market.
The pros to swing trading? There's plenty of opportunities, plus more than enough time to sit back and thoroughly think through your analysis. The ability to make money while doing something else, which I touched on just before, you can still have your full time job and trade after hours, and then also there are much lower transaction costs compared to intraday trading, as spreads and commissions don't tend to eat up as much as you kind of aiming for those larger moves in the market.
The cons? Swing trading of a sudden introduces this overnight risk. You're going to have to sleep at some point and you may have positions open during that time. That right there is a window of risk where you can not react to the market. I have also found that many people tend to lose sleep while they have open positions. Fundamental news releases start affecting your decision making. You're going to have to incorporate the economic calendar. It does require a lot more patience to be able to hold positions over long periods of time. You will have to be making decisions without your emotions affecting and changing your overall bias.
LONG-TERM
Finally, we start looking at our long-term investors. I call it investing because they tend to trade the markets on a higher range time frame like the daily, weekly or monthly chart. Trades are held throughout week and sometimes months trying to profit from the really large fundamental moves of the market.
The pros to long term investing or trading are you do not have to watch the market in today, the lower timeframes mean nothing to your analysis which allows you to step back and think clearly. You have much fewer transactions which relates to much lower transaction costs. You have more time to think about your trades and much more time to react to different news releases or change in market bias.
The constant long term trading are the very few opportunities per year. Fundamental knowledge is 100% required. There will be people that say you don't need it, but honestly I highly recommend you have a great deal of fundamental knowledge. It requires exponential amounts of patience and the ability to sit on your hands for weeks or months on end. It does require bigger account for more buying power so you can open multiple positions over long periods of time. Finally you will incur frequent losing months as you do not have many trades to bring that initial balance too profit.
I hope that bought a bit of clarity to the multiple timeframe traders and where you're currently sitting. Have a look at what your goals are with actually being involved with trading. Where do you want to get to? Is the time frame you're trading is actually going to allow you to get there? If you're here as a part time trader and you'd love to have that time freedom that so many people advertise. Maybe look for the bigger time frames as you can have that time to go do whatever it is you need, and you don't need to be sitting at a computer desk. If you love intraday trading and scalping and you're willing to put in the hours of work and more or less work a nine to five type role. Your scalp trading is going to be one for you.
One of the reason new traders don't do as well as what they first perceived is sometimes they could be trading a multitude of different things in the wrong style. That doesn't suit the way they are attempting to attack the market, or even their personality.
Today I wanted to have a look into trading the different time frames, what's required? What are the pros and what the cons of each time frame? Now there's a million different ways to trade the financial markets. The time frame you're trading is one of the most important. I wanted to jump in and provide clarity for some of the newer traders that perhaps are trading the wrong market based on what they are actually trying to achieve. I see a lot of people coming into the market to earn profits (obviously) and they come in because they want time freedom, yet they all seem to gravitate towards the scalping one minute, 5 minute and 15 minute charts, which are not going to provide time freedom even when you are successful.
I understand the adrenaline pumping in the intraday setups and then it can help people have and feed that get rich quick feeling that gravitates so many people to the market. But it's time we take it seriously. Let's seriously dive into the pros and the cons and analyze what's actually going to benefit you as a trader moving forward.
INTRADAY
Intraday trading is definitely the most frequent out of all the traders that come into the Forex market. The Forex market advertises intraday trading a lot more because the commissions and spreads are extremely affordable compared to trading other markets. Intraday traders, also known as scalpers, trade the markets on the lower timeframes, usually between the one minute and 15 minute, and trades are held throughout a day session and usually closed by the end of the day. You usually see these traders have your typical eight or nine hour window in which they sit in front of the charts and trade.
There's plenty of pros to intraday trading the high frequency of trades, the great adrenaline pumping feeling, the more opportunities across a range of different markets, you hold no overnight risk and it's very easy to dodge fundamental news. You also less reliant on those one or two big winners to bring in your yearly profits.
In saying that, there's also plenty of cons. Transaction costs are much higher when you're scalping. You have to incorporate spreads and commissions can sometimes eat up your profits. Mentally an emotionally, it is an extremely difficult task. You have to be able to be disciplined enough to make quick reaction decisions with money and risk on the line. As mentioned above, unlike the other trading systems and timeframes, it does require quite a lot of time and concentration throughout a trading session, which is why if you're chasing time freedom, I wouldn't recommend intraday trading.
SWING
Swing trading is a common way of trading, as a lot of people are able to do it part time away from whatever their main career. Swing traders trade the markets on a mid-range time frame, usually between the one hour to the four hour chart (sometimes going a little bit above). Trades are held for hours to a week and they try to profit from the larger moves in the market.
The pros to swing trading? There's plenty of opportunities, plus more than enough time to sit back and thoroughly think through your analysis. The ability to make money while doing something else, which I touched on just before, you can still have your full time job and trade after hours, and then also there are much lower transaction costs compared to intraday trading, as spreads and commissions don't tend to eat up as much as you kind of aiming for those larger moves in the market.
The cons? Swing trading of a sudden introduces this overnight risk. You're going to have to sleep at some point and you may have positions open during that time. That right there is a window of risk where you can not react to the market. I have also found that many people tend to lose sleep while they have open positions. Fundamental news releases start affecting your decision making. You're going to have to incorporate the economic calendar. It does require a lot more patience to be able to hold positions over long periods of time. You will have to be making decisions without your emotions affecting and changing your overall bias.
LONG-TERM
Finally, we start looking at our long-term investors. I call it investing because they tend to trade the markets on a higher range time frame like the daily, weekly or monthly chart. Trades are held throughout week and sometimes months trying to profit from the really large fundamental moves of the market.
The pros to long term investing or trading are you do not have to watch the market in today, the lower timeframes mean nothing to your analysis which allows you to step back and think clearly. You have much fewer transactions which relates to much lower transaction costs. You have more time to think about your trades and much more time to react to different news releases or change in market bias.
The constant long term trading are the very few opportunities per year. Fundamental knowledge is 100% required. There will be people that say you don't need it, but honestly I highly recommend you have a great deal of fundamental knowledge. It requires exponential amounts of patience and the ability to sit on your hands for weeks or months on end. It does require bigger account for more buying power so you can open multiple positions over long periods of time. Finally you will incur frequent losing months as you do not have many trades to bring that initial balance too profit.
I hope that bought a bit of clarity to the multiple timeframe traders and where you're currently sitting. Have a look at what your goals are with actually being involved with trading. Where do you want to get to? Is the time frame you're trading is actually going to allow you to get there? If you're here as a part time trader and you'd love to have that time freedom that so many people advertise. Maybe look for the bigger time frames as you can have that time to go do whatever it is you need, and you don't need to be sitting at a computer desk. If you love intraday trading and scalping and you're willing to put in the hours of work and more or less work a nine to five type role. Your scalp trading is going to be one for you.
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