Fx time frame is the time between opening a trade position and closing it. Just like our personalities are different, the pace at which a person trades in the market is different too. There are some people that prefer to do things slow and steady, while some others enjoy the excitement of a fast paced trading activity. Nevertheless, it is wise to consider the pros and cons of these time frames before picking anyone of them as the best time frame for you to trade fx.
Irrespective of your personality or what you think you want as a new fx trader, start first with the most flexible fx time frame available on your trading platform. Do not be overcome with the desire to get rich quick, thereby choosing a small time frame like 5 minutes or even 1 minute. It will frustrate the heck out of you because you are a “newbie”. Come to think of it, there is no such thing as a “get-rich-quick scheme”.
THE THREE BASIC TIME FRAMES
- Long-term time frame
- Short-term time frame
- Intraday time frame
LONG-TERM TIME FRAME
This kind of time frame is common among long-term traders. A long-term trader usually refers to diagrams that show information of daily or weekly trade activities in the market. Trades of this category last for as long as weeks, months, or years. New traders are advised to start with long-term time frames.
The bright side of trading a long-term time frame is that it allows the trader ample time to think each trade through before taking any actions. It is cost effective too. On the “not bright side” of a long time frame, we have that it is capital intensive, it involves large swings (this means that long-term trade opportunities do not come so often), and there might be frequent losses.
SHORT-TERM TIME FRAME
This time frame may be the best time frame for traders since it opens and closes within a short time frame but not as short as 5 minutes. A normal short-term time frame lasts for hours; it might even extend to weeks sometimes.
The benefit of short-term time frame is that it offers more trading opportunities to traders, and as a result offers many options to pick from. On the downside, a short term trade costs higher transaction fee because there are more spreads to pay. There is also the factor of overnight risk.
INTRADAY TIME FRAME
Under this type of time frame, trades are held using minute diagrams. Trading time start and closes at specific times, unlike other time frames where the trade can last for more than a day. Each trade can last for 1 minute, 5 minute, 15 minutes, or so.
This frame offers traders the advantage of plenty of trading opportunities and no such thing as overnight risk. Its disadvantages include higher transaction costs, limited time to think things through, and limited profits.