We are back with another technical material related to forex trading. One of the question that traders have is related to the time frame that they should use when trading. Even though there are some advocates that claim the 4h chart is the best, the truth is that you need to find a time that fits you. You have to choose the time frame according to a series of factors which will be discussed in the following sentences. We hope this material will help to understand what you need to take into account to make the best choices.
Factor #1 Experience
If you are at the beginning with forex trading and still learning about technical analysis or sentiment analysis, then it will be a mistake to trade on small time frames like the 5 minute or 1 minute. Also, going on higher time frames like the daily or the weekly will mean you will get less trading signals, so it will be hard to accumulate live experience in the market.
The ideal time frames, in this case, would be the 1h chart or the 4h chart. In this way, you will have enough time to make a trading decision and you won’t need to wait for days in a row to find a trading opportunity.
Factor #2 Capital
The size of your trading account also plays a major key in determining the time frame you will use. If you have a small account, it won’t be advised to trade on the daily chart. Why is that? Because your stops would need to be bigger, meaning the exposure would be higher. Sticking to the time frames around the 1h chart and choosing a trading strategy that spots intraday signals is suitable in this case. For those of you having big trading accounts, higher time frames could be an option.
Factor #3 Risk tolerance
If you choose to trade on higher time frames, your trades will last for longer periods so you will have to see how the market is going against you. Confidence needs to be built in order to face that kind of emotion which appears in these situations. If you are at the beginning with forex trading, you should trade on smaller time frames, so you won’t be forced to hold your trades open for days in a row. In this way, you won’t be in a constant state of fear, thinking about your trade over and over again.