Choosing your FX time frame is completely an individual choice. The time frame that one person works with may not be suitable to another, depending on personality types and personal preference. For someone with little patience who would feel nervous about holding out, a long-term approach would be a mistake. Personality traits could cause the trader to opt out at the wrong time, just for lack of patience. The standard choices when choosing a time frame range from long term, middle term, day trader or scalper. These are conventional time frames, but in reality a trader could choose any time frame, down to the number of minutes. Of course, forex trading should be based on multiple time frames. Even after a specific time frame is chosen, it is helpful to continue checking other time frames to get a general picture. The best way to determine investor horizon, or time frame, is by analyzing charts.
Long-Term Time Frames
These trades can be held for a number of weeks or even a year. New traders are often reluctant to use long-term trades because of the waiting time involved. It appears that it will take a long time to see if the trade is profitable and it involves an extended period of monitoring. However, long-term trades are an excellent way to begin in FX. They are easy to manage by checking the grade trends via the weekly chart. The trader can view daily charts and make dynamic adjustments to manage risk. Long-term FX traders typically make fewer trades than those making short-term trades.
Swing traders are looking for medium-length time frames for deals they can hold for a short period of time. By one month, the trader has usually left the position. A precise entry point is chosen after careful evaluation of hourly and daily charts, but weekly and monthly charts are used for establishing a long-term view. A trader working with a medium time frame tends to make more trades than with a long-term time frame, but remains very selective.
Day trades are for those who want to be in and out of a position in the same day. A trader can begin scouting the hourly and daily trends before breakfast, make multiple trades throughout the day and be totally out by dinner time. Entry points for these trades are usually based on 5 – 15 minute charts, 30 minute charts or hourly charts, since the goal is to be out by day’s end. Use of weekly and monthly charts are still valuable for getting the “big picture.”
Ultra short-term day traders are referred to as scalpers. These positions are meant to be held anywhere from 30 seconds to a few minutes. Although the profit margins can be less, the high quantity of trades per day can make them worthwhile. These trades are based only on very short-term or click charts. Keep in mind that the transaction costs will be higher due to the increased number of positions held.
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