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The Definitive Guide to Scalping, Part 3: Time Frames

The Definitive Guide to Scalping, Part 3: Time Frames

2014-01-22 20:00:00
Walker England, Forex Trading Instructor

Talking Points

  • It should be a top priority to determine the appropriate chart for your trading.
  • Reference a specific date range to begin your analytics
  • Finalize your execution by moving to a shorter term timeframe

One of the most frequent concerns voiced by new Forex scalpers is how to identify which timeframe and charts to use in their analysis. This question is often addressed after selecting a currency pair for scalping, and makes sense because the possibilities are almost limitless. The image below includes 12 different time frame charts for the EURUSD. If all of these possibilities seem overwhelming, don’t worry you’re not alone.

To help simplify this process today we will look at charts for scalping, and how to identify the appropriate timeframe for our selected strategy.

Learn Forex – EUR/USD and Time Frames

The Definitive Guide to Scalping, Part 3: Time Frames

A Frame of Reference

Whether you are a position trader or scalper it is always good to begin your charting with a frame of reference. A frame of reference is specifically looking at how much data is displayed on your chart. This reference is designed for scalpers to find the short term trend while identifying key levels of support and resistance. Think of it this way, scalpers looking for 10 pip gains would be ill advised to begin looking at multi-year graphs on a daily chart to begin their analysis. So what reference point and what timeframe charts should a scalper use?

Scalpers can begin by referencing 7 days’ worth of data. This allows the trader to take in exactly one weeks’ worth of pricing to establish short term market direction. Traders can then identify market swings and key levels of support and resistance for the week without getting analysis paralysis from having too many candles on their charting screen.

Below we can see two EUR/USD charts, both looking at one weeks’ worth of data. Notice how we can easily identify the trend on both graphs? Once this frame is selected, the time frame chosen simply denotes the number of bars displayed for the period selected. I find that a 30minute is a great place to begin, while traders wanting fewer bars may opt for a 2Hour or 1Hour selection.

Learn Forex – EUR/USD Weekly Reference

The Definitive Guide to Scalping, Part 3: Time Frames

(Chart Prepared by Walker England)

The Execution Chart

Now that you have narrowed down the trend, it’s time to consider an execution chart. This graph should be the final chart that you use in accordance to your scalping trading plan. While this chart may be the reference chart mentioned above, more often than not, scalpers prefer moving into shorter time frames at this point. This can aid in identifying intraday trading opportunities, and is most commonly called multi time frame analysis.

The final question you must ask yourself as a scalper is how many positions you wish to take in one day. While this answer will vary from trader to trader, normally in my experience the answer tends to fall in the 1 to 5 trade range. If you are looking to take 1-2 positions a day, I would recommend starting off with a 30 or 15 min chart. Traders looking for 3-5 positions a day can begin by looking for entries on a 5minute graph. Finally traders looking for 5 or more trades may be best served by consulting a 1 minute graph.

Of course everything is customizable when it comes to trading! My final recommendation is to find what works for you. Below is an example of a trade taken today, based off of a 5minute strategy. Join me for next week’s article for our Forex scalping guide as we look at different ways to determine support and resistance.

Learn Forex – EURUSD 5Minute Execution

The Definitive Guide to Scalping, Part 3: Time Frames

(Chart Prepared by Walker England)

Did you miss one of the earlier editions of The Definitive Guide to Scalping? Catch up on all of the action with the previous articles linked below.

The Definitive Guide to Scalping, Part 1: Market Conditions

The Definitive Guide to Scalping, Part2: Currency Pairs

The Definitive Guide to Scalping, Part 3: Time Frames

The Definitive Guide to Scalping, Part4: Support & Resistance

The Definitive Guide to Scalping, Part5: Scalping Ranges

The Definitive Guide to Scalping, Part6: Scalping Retracements

The Definitive Guide to Scalping, Part7: Scalping Breakouts

The Definitive Guide to Scalping, Part8: Risk Management

---Written by Walker England, Trading Instructor

To contact Walker, email WEngland@DailyFX.com

Follow me on Twitter @WEnglandFX.

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