Candlestick charts are plotted at different time intervals used for analyzing exchange rate data for a particular currency pair called time frames or periods, and analysts tend to select a range of multiple time frames in order to be able to assess the currency pair’s short, medium and long term trends and other price action behavior with associated time frames appropriate for their own trading strategy.
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 (M1)
The five minute time frame (M5)
The fifteen minute time frame (M15)
The thirty minute (M30)
The one hour time frame (H1)
The four hour or 240 minute timeframe (H4)
The one day or daily time frame (D1)
The one week time frame (W1)
The one month time frame (MN)
The one year time frame (Y1)
Trading Strategy Time Frames
What follows is a list of the more popular trading styles and their respective trading timeframes:
SCALPING: The timeframe for scalp traders is generally very short, since traders liquidate positions as soon as they make a small profit. 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.
The timeframes relevant for day traders generally range from several minutes to several hours, depending on market dynamics and the trader’s objectives. This short-term trading strategy requires that the trader only take positions during their pre-determined trading day, which would typically be specified by the trader ahead of time in their trading plan. By the end of their trading day, the day trader would generally need to flatten out all of their positions regardless of their profit or loss.
RANGE TRADING –
The timeframe for range traders varies widely and can be from a few hours to extending into the following trading session and beyond. This type of strategy is based on trading ranges. Such patterns are identified using technical analysis methods and based on the establishment of clear levels of support and resistance on an exchange rate chart.
TREND TRADING – the longest-term of the trading strategies, trend traders identify the overall trend in the market, establish a position and wait for the trend to play out. The trend trader can be a technical analyst buy may also look at underlying currency market fundamentals to establish their criteria for establishing a forex position.
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