Never miss a story from James Stanley

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to James Stanley

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

The Best Time Frame to Trade Talking Points:

  • Traders should look to utilize time frames based on their desired holding times and overall approach.
  • New(er) traders should begin with a longer-term approach, and longer-term charts.
  • Traders can look to move to shorter-term charts as experience, and success allows.

Regardless of how great a trader you ever become, you can always get better.

One of the most important aspects of a trader’s success is the approach being utilized to speculate in markets. Sometimes, certain approaches just don’t work for certain traders. Maybe its personality or risk characteristics; or perhaps the approach is just un-workable to begin with.

In this article, we’re going to look at the three most common approaches to speculate in markets, along with tips for which time frames and tools can best serve traders utilizing those approaches. In each of these approaches, we’re going to suggest two time frames for traders to utilize based around the concept of Multiple Time Frame Analysis.

When using multiple time frame analysis, traders will look to use a longer-term chart to grade trends and investigate the general nature of the current technical setup; while utilizing a shorter-term chart to ‘trigger’ or enter positions in consideration of that longer-term setup. We looked at one of the more common entry triggers in the article, MACD as an Entry Trigger; but many others can be used since the longer-term chart is doing the bulk of the ‘big picture’ analysis.

The Long-Term Approach

Optimal Time Frames: Weekly, and Daily Chart

For some reason, many new traders do everything they can to avoid this approach. This is likely because new, uninformed traders think that a longer-term approach means it takes a lot longer to find profitability.

In most cases, this couldn’t be further from the truth.

By many accounts, trading with a shorter-term approach is quite a bit more difficult to do profitably, and it often takes traders considerably longer to develop their strategy to actually find profitability.

There are quite a few reasons for this, but the shorter the term, the less information that goes into each and every candlestick. Variability increases the shorter our outlooks get because we’re adding the limiting factor of time.

There aren’t many successful scalpers that don’t know what to do on the longer-term charts; and in many cases, day-traders are using the longer-term charts to plot their shorter-term strategies.

All new traders should begin with a long-term approach; only getting shorter-term as they see success with a longer-term strategy. This way, as the margin of error increases with shorter-term charts and more volatile information, the trader can dynamically make adjustments to risk and trade management.

Traders utilizing a longer-term approach can look to use the weekly chart to grade trends, and the daily chart to enter into positions.

Longer-Term Approaches Can Look to the Weekly Chart for Grading Trends, and the Daily Chart for Entries

How to judge long term trends and use daily charts to enter positions

Prepared by James Stanley

After the trend has been determined on the weekly chart, traders can look to enter positions on the daily chart in a variety of ways. Many traders look to utilize price action for determining trends and/or entering positions, but indicators can absolutely be utilized here as well. As mentioned earlier, MACD is a common ‘trigger’ in these types of strategies and can certainly be utilized; with the trader looking for signals only taking place in the direction of the trend as determined on the weekly chart.

The ‘Swing-Trader’ Approach

Optimal Time Frames: Daily, and Four-Hour Charts

After a trader has gained comfort on the longer-term chart they can then look to move slightly shorter in their approach and desired holding times. This can introduce more variability into the trader’s approach, so risk and money management should absolutely be addressed before moving down to shorter time frames.

The Swing-Trader’s approachis a happy medium between a longer-term approach, and a shorter-term, scalping-like approach. One of the large benefits of swing-trading is that traders can get the benefits of both styles without necessarily taking on all of the down-sides.

Swing-Traders will often look at the chart throughout the day in an effort to take advantage of ‘big’ moves in the marketplace; and this affords them the benefit of not having to watch markets continuously while they’re trading. Once they find an opportunity or a setup that matches their criteria for triggering a position, they place the trade with a stop attached; and they then check back later to see the progress of the trade.

In between trades (or checking the chart), these traders can go about living their lives.

A large benefit of this approach is that the trader is still looking at charts often enough to seize opportunities as they exist; and this eliminates one of the down-sides of longer-term trading in which entries are generally placed on the daily chart.

For this approach, the daily chart is often used for determining trends or general market direction; and the four-hour chart is used for entering trades and placing positions.

The Swing-Trader can Look at the Daily Chart for Grading Trends, and the Four-Hour Chart for Entries

How to swing trade and use daily chart and the four hour chart

Prepared by James Stanley

We looked at an approach exactly like this in the article, The Four Hour Trader, centered on the daily and four-hour charts using price action as the predominant mannerism for entry.

But indicators can absolutely be used to trigger positions on the four-hour chart as well. MACD, Stochastics, and CCI are all popular options for this purpose.

The Short-Term Approach (Scalping or Day-Trading)

Optimal Time Frames: Hourly, 15 minutes, and 5 minutes

I saved the most difficult approach for last.

I’m not sure of exactly why, but when many traders come to markets – they think or feel like they have to ‘day-trade’ to do so profitably.

As mentioned earlier, this is probably the most difficult way of finding profitability; and for the new trader, so many factors of complexity are introduced that finding success as a scalper or day-trader can be daunting.

The scalper or day-trader is in the unenviable position of needing the move(s) with which they are speculating to take place very quickly; and trying to ‘force’ a market to make a move isn’t usually going to work out that well. The shorter-term approach also affords a smaller margin of error. Since less profit potential is generally available, tighter stops need to be utilized; meaning failure will generally happen quite a bit more often, or else the trader is opening themselves up to The Number One Mistake that Forex Traders Make.

To trade with a very short-term approach, it’s advisable for a trader to first get comfortable with a longer-term, and swing-trading approach before moving down to the very fast time frames. But, once a trader is comfortable there, it’s time to start building out the strategy.

Scalpers or day-traders can look to grade or evaluate trends on the hourly chart; and can then look for entry opportunities on the 5, or 15 minute time frames. The one minute time frame is also an option, but extreme caution should be used as the variability on the one-minute chart can be very random and difficult to work with. Once again, traders can use a variety of triggers to initiate positions once the trend has been determined, and we showed how to do this with MACD in the article, Scalping with MACD.

Scalpers Can Look to the Hourly Chart to Grade Trends, and the 5 or 15 Minute Charts for Entries

How to scalp using the hour chart and use 5 or 15 minute chart for entries

Prepared by James Stanley

An example of a strategy using these time frames can be found in the article, Short Term Momentum Scalping in the Forex Market.

For further reading, the article series ‘The Definitive Guide to Scalping’ by Walker England can be a great supplement.

---Written by James Stanley

James is available on Twitter @JStanleyFX

Trading can be emotionally draining, but we try to make it easier on you with our Trading with Confidence Guide!