Anyone who has ever opened up a Forex price chart has probably noticed that you can view that action in a number of different times frames, usually from 1 minute to 1 month. All this means is; which time interval is used in the X-axis of the chart. For example, in a 1-minute chart, each candlestick or price bar shows what happened over 1 minute of time.
S which time frame should you be using to trade? This is a question whose importance tends to be underrated. The best way to answer it is to ask yourself a few questions, and be very honest with your answers.
Firstly, how much time do I have available? If you only have a few minutes to spare each day, then you really have no business using any time frame lower than the daily. Unless you want to drill down to take a better look at the details of the day’s price action in determining how “good” the day’s candle really was.
My point is, that you will make more money by competently using a daily chart, then you will be incompetently using a chart of a lower time frame.
If you have a few minutes to spare every few hours, you could use the 4-hour chart. The more time you have to spare, the lower down you can go.
You might have guessed by now that I am of the opinion that the shorter the time frame you are able to use competently, the better you should be able to do in the market. However, the key word here is “competently”.
Shorter time frames are more difficult to handle than higher time frames. It is often said that all time frames are essentially the same, but that is not true. Shorter time frames provide more opportunities to make mistakes and get confused. That is why I advise newer traders to use higher time frames and then, when that is going OK, to try to look more deeply and drill down into what they are already doing successfully.
For example, you might find that of two candles which look equally bullish on the hourly chart, the one that looks more convincing regarding the twelve 5-minute candles which compose it, will often be the more successful trade.
Of course, it is always essential to look at higher time frames. Nobody ever made consistent profits just trading a 5-minute chart unless they were also looking at higher time frames all the way up to at least a few weeks of recent price action.
The true advantage in using lower time frames, is that it can help you win the same trades, but with more precise entries and exits, which means greater overall profits.
Finally, I see the 4-hour time frame as a very good place to start. This is because, going back to what I said about not all time frames behaving equally, 4 hour candles strike a nice trade-off between being large enough to show something meaningful, but also being small enough to allow you to get into a piece of the move before it ends.