By: Adrian Friggieri
Some people use time frames in a very erratic manner. If you focus only on a 5 min chart you could be trading against the 15 min chart or the 30 min chart. Every day there are loads of retracements, news spikes, market noise and loads of other reasons for the pair to move against or in favor of the trend.
You should be using Forex time frames to confirm your trades and to make sure about your entry and exit strategy. My suggestion based on a number of trials over the recent years is to at least use 3 Forex time frames to make sure you understand the trade you will enter before you pull the trigger. Let me explain this in more detail.
Imagine a trade which has been trending upwards for some 50 pips on your 5 min chart and you decide to enter a long position at high 1 to ride the trend and hope that the uptrend continues in your favor.
Suddenly the trade reverses the direction and starts moving to Low 1, you panic and you decide to exit your long or even of you had a tight stop your trade would be stopped. Possibly you enter a short to try to counter trend only to reverse back to high 2 and so on.
This scenario might seem not always possible but in fact it is very common. The diagram shows a higher timeframe of 1 hour, if you start reducing to 15 min or 5 min you will have an uptrend followed by a downtrend, back to an uptrend and so on.
The smaller Forex time frames if used in isolation would only give you loads of false signals that would get the trader confused from where to enter and exit. Whilst if you use the larger timeframe of 1 hour in conjunction o the smaller timeframe of 5 min you could be planning well a number of high probability winning trades. You could be in a position to grab most of the pips available on the day.
Make sure to use Forex time frames to understand what is happening and use the larger trend in your favor to enter smaller Forex time frames positions.