Best Time Frame to Trade Forex
February 6, 2010 by Paul Gates
Filed under Forex Broker
One of the surest roads to success in trading is sticking to a time frame that suits your personality. Time frames can be summarized best between day trading, swing trading and position trading. Let’s take a look at each styles overview in order to help you decide which is right for you.
Day trading or intraday trading are quick trades that often last anywhere from minutes to hours and take place within the same trading day. Day trading is also known as scalping and trades are very rapid, usually small in size and many trades are taken each day.
The advantages of day trading or intraday trading include little risk as each trade generally has a very tight stop loss and also small take profit levels. Scalping takes a lot of intense focus in order to manage each trade and watch the market fluctuations.
The cons of intraday trading are you can loss money very quickly and you also will pay a lot of money in commissions. A small mistake can turn into a huge loss in a very short amount of time.
Swing trades usually last anywhere from one day up until several days or even a couple of weeks. Swing traders typically are trying to catch trend reversals or price retraces. Swing traders tend to use recent swing highs and lows as points of reference to set entries and exits off of.
There are many advantages to swing trading which include that because of the higher time frames you are trading there are less possible signals during the day which makes trades easier to manage. Also the spread and commissions are less since you are taking fewer trades which helps a lot.
One of the biggest disadvantages of swing trading is that traders tend to get emotional tied to their position believing they are going to be correct even if the position gets away from them. Even worse is when traders average down into a trade creating more of then not an even bigger loss.
Otherwise known as the buy and hold method, position trading is known as a trend trading style where traders build themselves into large positions over days, weeks and even months trying to profit when the market is trending. Often traders are able to get themselves into a snowball situation when the markets is running with them.
Some traders tell of the position trading style to be the easiest and most profitable. Fitting into any active lifestyles as often traded on the daily time frame it is also the most desirable! One signal period a day makes it very easy to manage and adjust new and open trade orders.
There is always a downside and when it comes to position trading the largest con is that often traders give back big gains while trying to hold a position for even larger gains.
Knowing what time frame is going to fit you best is very important when it comes to your success. Spend some time really thinking about how active you want to be as a trader, what feels the best for you and then try to build a strategy around that. Once you are comfortable trading one time you will have the experience to actually be able to trade the other times frame even better which will help your trading grow.
After finding the best time frame to trade you can use forex signals to help you learn how to trade better.
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