Confusion over which time frame you should trade?
In this weekly video:
00:27 – Which time frame chart should I look at?
01:11 – A few options for you
02:02 – Only trade on the close of the candle
02:58 – Dedicate 1 hour a day to trade the shorter time frame charts
03:31 – I trade for 1 hour a day
04:44 – Different charts showing different things
06:10 – Complete confusion
Do you get confused trying to understand which timeframe Forex chart you should be looking at and you should be trading. If that's you, listen up, I've got some really important information.
Hey Forex traders, Andrew Mitchem here, the owner of the Forex Trading Coach with video and podcast number 297.
Now a lot of people come to me and they say, “Hey, Andrew, I'm confused with which time frame chart I should be looking at.
Which time frame chart should I look at?
Which is the best time frame? Should I be looking at 15 minute charts, should I be looking at hourly charts? You also talk about trading daily charts, Andrew, so which is the best?” Now the answer is there is no one right or wrong time frame chart to trade. And it really depends on a number of things but also it depends largely from your point of view, the things you can control is what type of trader are you? And how long, how much time per day or per week do you really want to start or sit looking at charts on your screen? So you've got a few options. You could be the sort of trader that likes to sit and watch charts and you might like that price action, seeing price moving around quite a lot.
Which time frame chart should I look at?
If that's you, then you should definitely be trading for shorter time frame charts, probably one hour charts and below, so 30 minute, 15, 5 minute, that type of thing.
However, if you are the sort of trader who likes to trade less and you've got other things to do, you've got jobs, you've got family, you've got other activities that you like to do, and you just want to say, I want to trade for a few minutes once a day or like that, then you should definitely be looking at the longer time frame charts. Now things like four hour charts possibly might be the shortest that you go to and you might like the longer time frames charts like the daily charts, weekly charts and even the monthly charts. And the great thing is with the way that I trade is, I only look at taking a new trade or potential new trade at the close of any candle.
Only trade on the close of the candle
So we are now into November, now we've just taken six trades based on the close of the October charts. Because they are monthly chart trades, they have some very big rewards to risk ratios, up around four to one. Now I've just placed those trades this week. I put six of them on and they've got half of one percent risk each. Now if they, if three of them make a profit and three lose, I'm potentially going to make some very nice profits but it took me just ten minutes to scan through the monthly charts at the close of October and into the first day of November and see the trades that were setting up and taking the trades.
So it all depends when you like to trade, how often you like to trade, that type of thing. The other thing you can do is you like the shorter timeframe charts. There's nothing wrong with those time frame charts.
Dedicate 1 hour a day to trade the shorter time frame charts
What you could do is say, I'm just going to pick one hour a day that I focus on trading, say five or fifteen minute time frame charts, just because you like the shorter time frame charts mean to say you are completely glued to your screen, however the danger is a lot of people either become too reactive with their emotions as in like they force themselves to see a trade because they're trading five minute charts, let's say or they just sit at the computer for hour upon hour upon hour. That for me personally, I trade no more than one hour a day. That's all it takes.
I trade for 1 hour a day
Now yes, I've got years of experience and I know what I am looking for but I look at the close of the daily chart at 5 pm New York time and I look at daily charts at that same time, I can also scan through, I've got some great software on MT4 that allows us, and that's myself and my clients to trade twelve hour charts, eight hours and six hours and I also look at the standard four hour chart at that time. And scan through all those charts in no more than some 10 to 15 minutes.
And then from my point of view, I can look say four hours later or six hours later at the close of the four or six hour chart and then at 5 am New York time, I can look again at the twelve hour, the six hour, the four hour and I also look at the one hour time frame at that time of day because it's into the European session by then and there is more activity than the 5 pm close of the day chart which is started almost into the Asian session when things are generally a bit quieter and spreads are bigger. I don't want to be trading things on one hour charts at that time of day. But then it's into the European session, I'm absolutely I'm looking for one hour chart trades if they show.
So that's how to do it but the actual which charts you should trade because a lot of people get confused with saying, “Hey, look, I want to trade a one hour chart and this particular currency is looking really overbought and I go on to a daily chart and it's looking oversold.
Different charts showing different things
And I'm confused and which should I look at?” The important thing is from the way that I look at it and the way that I have always traded, is you see the trade based on the time frame chart that you are looking at. So let's say you saw a good looking setup on a one hour chart, trade that particular trade setup, look for it's stop loss and its profit target, et cetera, based on what you see on that one hour chart.
Now don't go and take the trade and then go down to a five minute chart and go, it looks like it is about to reverse on me and I'm going to close the trade, because that's what so many people do. And for me it a case of if you are taking the trade based on a one hour chart trade, put your exit levels in there, your safety levels in there and then manage the trade if you wish to manage it. Some people just put a stop on, profit target on, you know your risk, walk away, leave it. But if you do like to manage your trade a little bit more, base it on the decisions you see on that one hour chart at that time. So like an hour later, is that trade still going well, yes or no? Is it looking like it's reversing on me and it's not quite going to hit my profit target, yes or no? Make your decisions based on that one hour chart trade of what you see at that time. It's really important because otherwise you would just have complete confusion because naturally like a monthly chart's going to tell you something different to a daily chart or a five minute chart. It just is.
So base your decisions exactly like I based my six trading decisions on the close of the October monthly candles based on the the monthly chart.
So I'm basing it on the monthly chart and I'm accepting that some of those trades may be open in the market for several months because they're based on that longer time frame chart. No different to a one hour chart, I accept that the trade may be open for several bars or several candles. It's just the difference is the actual time frame between several months and several hours. So it all depends on what you see on that time frame at that time.
So that's the danger when you work from home and you record videos at home and your kids are wanting to come home from school and call you right at the time you make videos, the phone rings. So sorry about that. I'm going to end this video now and see what my kids are up to so thanks again. I'll see you this time next week. Bye for now.