When it comes to building your trading strategy, one of the first things you need to decide is how frequently you will trade. Depending on your preferred trading style, be it scalping, day trading, swing trading, or positional trading, you will open and close positions at different frequencies. However, it can be confusing to decide on the best approach. It is important to remember that trading is a personal journey, and everyone has their preferences and style. What works for one trader may not work for another. Therefore, the best timeframe for trading is the one that suits you best. There is no right or wrong answer here, and you will need to experiment to find the timeframe that works best for you. Every timeframe has its advantages, and what may work for us may not work for you. So, it's important to find the timeframe that is best suited to your trading style and experience.
Which timeframes are available for trading?
If we use a candlestick chart, we can configure the candles to display a specific timeframe. Usually, traders choose among the following nine variations:
1 minute, 5 minutes, 15 minutes, 30 minutes, 1 hour, 4 hours, 1 day, 1 week, 1 month
It is important to note that you have the freedom to choose any timeframe you prefer, such as 6 or 8 hours. However, we recommend sticking to standard time frames to increase the effectiveness of technical analysis. This is because technical analysis works based on the fact that many market participants simultaneously observe the same patterns on their charts. For example, if several traders are monitoring a particular key level and observing the same price movement, there is a high likelihood that the market will rise as a result.
Which timeframe should You choose?
As a new trader, it is common to lose money by trading on timeframes that do not match your experience or personality. Many beginners seek to make quick profits and therefore start trading on 1-minute or 5-minute timeframes. However, these timeframes require a lot of trading experience, good self-control, and the ability to grasp the current market situation quickly. A common mistake made by traders is that they think they can beat the market by making many trades. What they fail to realize is that sometimes it is better to wait and observe rather than act impulsively. As Edwin Lefèvre once said, "It never was my thinking that made the big money for me. It always was my sitting." Some traders feel most comfortable trading on 1-hour charts, but for others, trading on a 1-hour timeframe feels too fast as they do not want to monitor the market during the day and look at charts every hour. The most important thing for you is to find a timeframe where you feel most comfortable. You should also consider the amount of money you will use for trading. It is normal for new traders to constantly change timeframes in search of their trading style. A great solution for them would be to trade on demo accounts.
Advantages and disadvantages of different timeframes
Long-term positions, which are held for several days, weeks, or even months, are not required to be monitored throughout the day. However, it is always important to stay informed about market fluctuations. This will allow you to thoroughly consider opening new positions. Fewer trades may result in unprofitable months, but being patient is key to withstanding significant market fluctuations without closing your positions prematurely.
Short-term positions, on the other hand, are held from several hours to days, with more trading opportunities and positions available. This means more opportunities to trade without experiencing loss-making months. However, holding positions overnight may entail additional risks.
Day trading involves trading within 1-minute to 15-minute timeframes, offering a large number of trading opportunities without the need to hold positions overnight. Psychologically, it can be challenging to open multiple trades during the day. Additionally, it may not be possible to profit significantly from trend movements.
In summary, every trader will eventually develop their own unique trading style. Once they are clear on what suits them best, they will also know how frequently they should trade. There is no right or wrong choice when it comes to selecting a timeframe for trading. You will discover your preferred timeframe as you embark on your trading journey.
Stay tuned!