Choosing The Right Chart Timeframe For You

One of the main reasons traders don’t do well as they should is because they’re usually
trading the wrong timeframe for their personality.

New traders will want to learn how to get rich quick so they’ll start trading small
timeframes like the 1-minute or 5-minute charts. Then they end up getting frustrated when
they trade because it’s the wrong timeframe for their personality.

Okay, so you’re probably asking what the right timeframe is for me? Well, if you had been
paying attention, it depends on your personality. You have to feel comfortable with the
timeframe 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. But you shouldn’t feel that the reason for the pressure is
because things are happening too fast that you find it difficult to make decisions or so
slowly that you get frustrated.

When I first started trading, I couldn’t stick to a timeframe. I started with the 15-minute
chart. Then the 5-minute chart. Then I tried the 1-hour chart, 4-hour chart, and the daily
chart.

Finally after a long period of timeframe unfaithfulness, I felt I was most comfortable
trading the 1-hour charts. The timeframe as longer, but not too long, and trade signals were
fewer, but not too few. I had more time to analyze the market and didn’t feel rushed
anymore.

On the other hand, I have a friend who could never ever ever trade in a 1-hour timeframe. 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 5-minute chart. It still give him enough time
(but not too much) to make decisions based on his trading plan.

Another friend of mine can’t figure out how I can trade a 1-hour chart because he thinks
it’s too fast! He trades only daily, weekly, and monthly charts. His name is Warren Buffet.
You might know him :).

What is the right timeframe for you? Well, it all depends on your personality. You have to
feel comfortable with the timeframes you are trading in.

Ask yourself the following question: Are you a scalping, short, swing, position or long-term
currency trader? How many hours you want to dedicate to forex trading? You have to find out
before you can choose the right timeframe to trade from.

It is a fact that many forex traders find the right timeframe through trial and error. For
example, while testing systems or strategies in different timeframes, a trader can compare
their performance and then choose the most accurate and profitable timeframe to trade from.

Timeframes can be categorized into 3 main types:

1. Intraday
2. Swing or Position
3. Long-term

Which one is better?

It depends on your personality! Let me give you a breakdown of the three to help you choose:

Intraday Timeframes

Scalpers - The scalper profits from small currency price changes holding positions just for
seconds or minutes. They repeatedly buy and sell several times a day, usually in larger lot
sizes but with small profit margins. the typical objective for a scalp trade is 4-15 pips.
They usually love trading key economic data releases to make quick profits from it.

Preferred timeframes for scalpers are 1 min, 5 min and 15 min chart.

Day traders - The currency day trader buys and sells positions throughout the day, profiting
from short-term trends, the typical objective for a day trade is 15-100 pips. Day traders
tend to be range traders, buying a currency pair low and selling high. Most online currency
traders are day traders. They usually use technical analysis to make trading decisions.

Preferred timeframes for day traders are 5 min, 15 min and 60 min chart.

Swing traders - Swing traders are trying to buy low and sell high, the main difference
between swing - and day traders is the length in holding the open position, typically, swing
traders will hold their open position(s) 2-5days. They usually use technical analysis to
make trading decisions.

Preferred timeframes for swing traders are 60 min, 4 hour chart and daily chart.

Position traders - The main difference between a position trader and swing trader is that
position traders will normally have a longer time horizon than swing traders for holding a
position in a currency pair, typically, position traders will hold their open position(s)
5-50days. They usually use both fundamental and technical analysis to make trading
decisions.

Preferred timeframes for position traders are 60 min, 4 hour chart and daily chart and
weekly chart.

Long-term traders - Long term currency traders usually hold positions for month or even
years profiting from a long term trend. They usually use both fundamental and technical
analysis to make trading decisions.

Preferred timeframes for long-term currency traders are daily chart and weekly chart.

Picking the Right Timeframe

Below table might help you in choosing the right timeframe.

You have to decide what the correct timeframe is for you?

You also have to consider the amount of capital you have to trade. Shorter timeframes allows
you to make better use of margin and have tighter stop losses. Larger timeframes require a
bigger account so you can handle the market swings without facing a margin call.

When you finally decide on your preferred timeframe is when the fun begins. This is when you
start looking at multiple timeframes to help you analyze the market.