What Time Frame is Best for Forex Trading?
In time-based charts such as the Japanese candlestick chart and the bar chart, price activity is recorded in specified time units called timeframes. This is unlike the non-time-based charts like the range bar chart and the Renko charts where each price bar represents a specified range of price movement.
If you use the bar chart or the Japanese candlestick chart for your technical analysis and trading as most people do, you may be wondering which timeframe is best for trading. However, what you need is to understand your style of trading first and then the different timeframes available. Here, I will walk you through the various timeframes, the trading styles, multi-timeframe trading, and then discuss which timeframes you may find most suitable based on your trading style.
The standard time frames in the MT4 platform
Different platforms come with different timeframe configurations. Each time frame shows you what price does within that period of time. In MT4 platform, the standard timeframes are:
- One minute
- Five minutes
- Fifteen minutes
- Thirty minutes
- One hour
- Four hours
How you can get other time frames in the MT4 platform
Apart from the standard time frames in the MT4 platform, you can also get any other time frame you want. All you have to do is to convert any of the time frames to the time frame of your choosing using an appropriate multiplier. The one-minute time frame can be converted to any time frame — from two-minutes upwards.
The MT4 platform comes with a period converter script which you can use to convert the standard timeframes. Here’s how you can do it
- Open a standard timeframe that can be easily multiplied to your desired time frame
- Go to the script folder in the navigator panel and drag the Period converter to the chart
- Input the appropriate multiplier factor in the window that pops up; click allow DLL imports in the common tab of that window and finally, click ok.
- Open the time frame you have created from the offline chart by going through the file menu and ‘open offline’.
Trading styles and time frames: Who uses which time frame?
There are at least four different trading styles and each of these styles make use different sets of timeframes for technical analysis.
- Scalping: This style uses the shortest timeframes as trades can be opened and closed within minutes. Those that trade this style aims to make profits from the little price fluctuations in the lowest timeframes which they hope to accumulate over a large number of trades during the day. The timeframes they usually employ is from the fifteen-minute time frame down, even as low as 10-seconds.
- Day-trading: Day-traders aim to make one to three trades a day. They try to profit from the intra-day price changes. Their usual timeframe of choice is the one-hour time frame and the thirty-minute time frame.
- Swing trading: Swing traders can leave their trades to run for a few days to a few weeks. They try to milk the short-term price swings. They mostly make use of the daily and four-hour time frames.
- Position trading: Those that use this style are the medium to long-term traders and investors. These groups can leave trades for months and even years. They make use of the monthly and weekly time frames.
The new trend these days which I use myself is to analyze the market in at least three different time frames. This is called a multi-timeframe analysis. It involves:
- using a higher time frame than your usual one to get a broader perspective about the market;
- using your usual time frame to pick your setups that fit into the broader market outlook and
- then, using a lower time frame to refine your entry point.
A day trader, for example, may employ the daily, hourly and fifteen-minute time frames.
What time frame is the best in forex trading?
This question can only get a subjective answer as different traders have different tastes and styles. Whatever time frame I say is best for me may not be the best for you or even suitable for your temperament. A position trader may see the one-minute chart as noise while a good scalper will it as the real deal.
However, the multi-timeframe analysis offers a more holistic approach to technical analysis. You can have a broader view while still trading your time frame of choice as well as fine-tune your entry and exit points.
In conclusion, there is no best timeframe for everyone. You need to understand your style of trading first and the different timeframes available and then choose the timeframe(s) that suits you best. This way you can develop a comfortable trading system.
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