September 22, 2009
What Is The Best Time Frame To Trade Forex?
Every trader has their own favourite trading methods and therefore will be drawn to particular time frames. So today I thought I'd discuss which time frame I consider to be the best one, ie the most profitable.
It all depends on your trading strategy of course, but in my experience the best time frame to use is the 4 hour chart.
There are several reasons for this. The first reason is simply because my main trading strategy (see right for more details), which I have been perfecting over the years, generates consistent profits on this particular time frame (with the help of the daily chart for determining the overall trend).
Secondly trading the 4 hour time frame gives you the best of both worlds in that it enables you to generate the kind of profits that a lot of short-term traders are able to generate every single day, whilst ensuring that you don't necessarily have to be sitting at your computer all day long because you only need to be alert when a good set-up looks like presenting itself.
This brings me on to my next point which is that trading the 4 hour charts is a very relaxing way to trade the markets. You can analyze various different currency pairs and really take your time planning your trades. This is certainly not the case with short-term trading where you have little time to think and have to be very quick on the button to realize any gains, or minimize any of your losing trades.
This time frame is just about ideal in my opinion because you can generate winning trades of say 100-200 pips in a single day or you can let them run for a few days to capture 300-500 pips in some instances. Just one of these trades per week can give you an excellent full-time income and I think you would agree that it's much better to spend your week looking for one or two high probability set-ups on this time frame rather than trading lots and lots of positions on the shorter time frames which may only give you 10-20 pips per trade.
Also because each trade doesn't necessarily last that long (often no more than a few days at most) you avoid much of the boredom that arises when you trade the daily or weekly charts, for example. Some people like to trade the daily charts but you do need a great deal of patience. You also need to use fairly large stop losses to ensure that the price ultimately moves in your favour without being stopped out prematurely.
So as I say I personally think the 4 hour time frame is by far and away the best time frame to trade, although different time frames obviously suit different strategies.