Best Time Frames for Trading Forex

Traders can get conflicting views of a currency pair by examining different time frames. While the daily might be showing an up-trend, the hourly can be showing a down-trend. It can be really confusing for beginning traders, which time frame to build strategy on?

Perhaps the best way to explain this variation is that the time periods these commonly used terms refer to tend to depend on the usual time a position is held given the type of trading strategy that a trader employs.

Some of the most common incremental time frames used by technical analysts when reviewing exchange rate movements for Forex currency pairs include the following:

  • The one minute time frame

  • The five minute time frame

  • The fifteen minute time frame

  • The thirty minute

  • The one hour time frame

  • The four hour or 240 minute timeframe:

  • The one day or daily time frame

  • The one week time frame

  • The one month time frame

  • The one year time frame

Forex Time Frames by Trading Strategy

Although trading time frame terminology is not especially precise, it can nevertheless help to get a general understanding of what phrases like long term, medium term and short term actually mean to traders who use different trading strategies.

Scalper

The market adage, “long term is noon” aptly describes the scalping trader’s approach to time spent in the market. Scalping is a strategy that is often popular with market makers, since they can quickly offset the risk of positions they receive from customers at advantageous rates due to the bid/offer spread they quote. They can also take small profits by simply quoting prices to other market makers and via professional Forex brokers. Other scalping traders consist of proprietary desks and retail traders with access to very tight market spreads and who pay very low per trade commissions, if any.

Day Trader

Day trading is type of trading where the position is being closed within a day .

  • The Long Term – This time frame for a day trader covers a period lasting from several hours to an entire day session.

  • The Medium Term – This time frame for a day trader covers a period lasting from ten minutes to around an hour.

  • The Short Term – This time frame for a day trader covers a period lasting from seconds to several minutes in duration.

Swing Trader

Swing traders are those who look to take advantage of bigger fluctuations in market exchange rates. They are usually more than fine with holding positions overnight.

The time period each of these time frame categories tends to cover that is most relevant for swing traders can be described as follows:

  • The Long Term – This time frame for swing traders covers a period lasting from several months to a year or more in duration.

  • The Medium Term – This time frame for swing traders covers a period lasting from several weeks to a month or so.

  • The Short Term – This time frame for swing traders covers a rather brief period lasting from a few days to a week or so.

Positional Traders

Those engaged in long term foreign exchange trend trading or foreign currency investment activities tend to have a much lengthier time frame that they are willing to hold positions for.

  • The Long Term – This time frame for trend traders or investors covers a period lasting a few months to more than a few years in duration.

  • The Medium Term – This time frame for trend traders or investors covers a period lasting from several weeks to as long as a few months.

  • The Short Term – This time frame for trend traders or investors covers a period lasting a few weeks.

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