In the previous lesson, we covered how to trade multiple timeframes in the forex market. So, what timeframe should you choose to trade?
The timeframe you chose to trade will be entirely determined by the type of forex trader you are. Therefore, in this lesson, we will cover the timeframe to trade depending on the type of forex trader you are, i.e., position trader, swing trader, day trader, or a forex scalper. It is worth noting that you should consider trading three timeframes in Forex.
Timeframes for a Forex Position Trader
If you are a forex position trader, it means you intend to have your trading position open for several months to years. Therefore, you should trade the monthly and weekly timeframes. These frames give you a long-term perspective of the market trend while filtering out the hourly and daily “noises” of the price spikes.
Timeframes for Forex Swing Trader
For a forex swing trader, your goal is to have your positions open overnight to just a few weeks. With such a strategy, while performing your multiple timeframe analysis, you should start with the daily timeframe to establish your selected currency pair’s dominant trend.
On the chart, the daily timeframe will cover several weeks, which will help you establish the support and resistance levels over this period. With this perspective, you will quickly identify the high and low extremes. Narrow down to a 12-hour timeframe to see if this timeframe lines up with the observed trend, then finally use the 4-hour timeframe to find the entry point for your trade.
Timeframes for Forex Day Traders
If you are a forex day trader, that means you enter and exit all your trades within 24 hours. In this case, you should trade the 4-hour, 1-hour, and 15-minute timeframes. With the 4-hour timeframe, you will be able to establish the support and resistance levels for the past few days for your selected currency pair. The 1-hour timeframe will help you identify if the intra-day price trend aligns with the observed dominant trend. Finally, the 15-minute timeframe will enable you to narrow down the best entry and exit points for your trades, depending on the current price trend.
Timeframes for Forex Scalpers
For the forex scalpers, the smallest minute-by-minute price spikes count. Therefore, you should trade the 30-minute, 15-minute, and 5-minute timeframes. With the 30-minute timeframe, you get to identify the prevailing short-term trend with the selected currency pair. The 5-minute timeframe narrows down the tend to show how the most current price spikes build-up to the short-term trend. This timeframe also serves as your trigger timeframe for entry and exit.[wp_quiz id=”89150″]