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Time is money: Choosing the right time frame

The time frame is a time interval on the asset chart on which are displayed the financial tool fluctuations in a definite time. For example, considering the time frame of M1 (1 minute) we see candles (bars), lasting 1 minute.

time is money forex

The basic principles of a technical analysis were and remain invariable on all time frames. After all, many favorable opportunities for market entry can be found on any time frame. But trading on the M1 and H4 has their features, and tools (indicators) will differ on settings.

What are the benefits of time frames for the trader?

Time frames are very convenient. One candle or bar of the chosen time frame will show the dynamics of the price change for this period. The longest period for the analysis it is necessary, the higher (longer) will be the time frame. Such peculiar market scaling, is undoubted, very convenient, especially for the analysis of long-term trends. In scalping, we want to consider more fine details of price fluctuations, so we decrease the time frame to M15 or M1 – and everything becomes clear.

Thus, the chart isn't encumbered with unnecessary candles, and the trader can choose only necessary data. Also, it is worth remembering of scaling button's availability (“+” and “-”) at the MT4 toolbar.

In the standard MT4 terminal can establish several time frames: M1 (1 min.), M5 (5 min.), M15 (15 min.), M30 (30 min.), H1 (1 hour), H4 (4 hours), D1 (1 day), W1 (1 week) and, at last, MN (1 month). Each interval is significant in its own way.

If you need other time frames, I recommend using the quotes online – the special sites where currency pairs quotes are available in real-time without downloading special soft. As a rule, everything happens directly on the site with automatic updating of the price and a choice of time frame, including non-standard (for example, 2 minutes or 3 hours).

Time frames - important recommendations

If you prefer technical analysis, you need to collect a maximum information on price fluctuations and to estimate perspectives. Therefore, on the first place, there is a price chart studying. From the start, the smart decision will be the analysis of long-term charts (for example, D1 or H4) with a gradual transition to short-term. The large periods display less “market noise”, and it is simpler to differentiate graphical models, trend lines, levels of support and resistance on them. Classical trading, as well as many experienced traders working at large deposits, tends towards such analysis – from “macro” to “micro”.

The point of entry is determined on the smaller time frame (after the analysis of long one). The less is the time frame the more exact the entry point will be.

Often beginning traders ask a question – in what direction the price moves? Without specifying the time frame, the question is deprived of sense. After all, on the hour (H1) the asset can grow, and on a five-minute (M5) – fall.

Important: on different time frames behavior of the price is similar. It means we will see trends which interrupt corrections, uncertain volatility, etc. as on larger time frames like H4 and above, so on the small – M1, M5, etc. Only on small time frames, “crazy” movements will be obvious, on large time frames, they could not be noticed.

It is necessary to realize that each time frame has “admirers”. The most popular time frames are M15, M30, H1, and H4. Time frames less than M15 are used by scalpers, time frames higher than H4 – prefer long-term traders-investors.

What time frame to choose for effective trading?

The scale of price changes corresponds to the time frame. If the price changes in days seldom exceed a limit in several percent, for 1-2 months the price can change for 10-20% and more. And here the numerical changes in price Intraday for the tenth and 100-th shares of a percent are a routine case! And if to look attentively, it becomes clear that a number of fluctuations in day frequencies are higher than the result in a day. So there is an impression that, trading on small time frames, it is possible to get more profits, using many transactions (as scalpers do). Also, the beginners trade in such a way too. Actually, the results aren't so great then it was predicted. But why?

Each transaction has a price. The commission of the broker, constantly changing spread overweight, not in our advantage and are present on all time frames. Also, small time scales differ in a considerable randomness of the price that it is difficult to expect. Any large player can create an impulse which is also difficult predicted by regular traders. On large time frames arises less accidental movement of the price as on a vast temporary scale for such strong movement it is necessary much more effort.

Choosing time frame, you should take into consideration your own trading rules. Time frame shall be optimum when it is possible “to cover” with transactions a good volatility, and the cost of the transaction will be accepted in relation to average profit from the transaction.

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Number of comments: 2
  • Mikeknowles
    • #

    Actually, it is a very important thing, sometimes even crucial. As for me, I prefer to test the trading symbol on several time frames, and just after this, to open the orders.

  • Johnyeah
    • #

    I prefer long-term trading and of course I use larger time frames, but sometimes charts can draw very interesting opportunities on M15 and M30.