One of the most sought after questions in the trading world What is the best time frame to trade futures and forex? This is a very complex question and will take some detail which will be covered in this article.
To begin I will answer a question with a question, what is your style of trading? The time frame you choose will be heavily dependant on you as an individual. Below we will look at specifics. If you prefer to place intra day trades and scalp the market you will look to a much different time frame than a trader that wishes to place one trade per day or even less. Another few question, what is your trading method, do you play breakouts or reversals or both?
In this article we will be discussing supply and demand trading which can be used for all mentioned above no matter if you are trending, sideways or any other market condition. True supply and demand is the one thing that is and always will be constant, because it is the complete reason for market movement. For example if there is an influx of buyers market moves up (demand) and if there is an influx of sellers market moved down (supply).
Lets start with an amount of time frames to view. This is important because looking at too many will cause confusion and hesitation which can be detrimental to your trading. As a rule of thumb the maximum number of time frames we look to is three for any given instrument. This gives us all of the information we need to determine where the majority of buyers and sellers are most likely to step in.
1. The largest time frame is used for major supply/demand imbalances in any given market. We want to know if we are butting our heads up against a brick wall before taking a trade and know where the potential reversals are going to take place.
2. The middle time frame is used for market direction or trend analysis. Knowing the direction of the market is extremely important and gives us the ability to play impulse waves after a corrective wave for higher proabability entries with the trend. This also gives defined levels for entry.
3. The smallest time frame is used for refining our entries for lower risk. If we have pre defined our levels via #2, we can now reduce the amount of risk by specifying a smaller zone or entry point. This is also where we can use our break outs to get back and forth between the levels determined in #2.
Below is a collaboration of time frames we use for each style of trading. It is important to remember there is not one right answer because we are all different so the answer to What is the best time frame to trade is simply which ones fit your personality the best. After choosing them consistency becomes key in sticking to them to alleviate future confusion or hesitation.
Intraday Scalp Trading
- 60min / 5min / 1min
Intraday and Swing Trading
- Daily / 60min / 5min
Swing and Position Trading
-Weekly / Daily / 240min
Long Term Trading
-Monthly / Weekly / Daily