Forex Trading – Which Time Period To Trade In.

The forex market is unique in that it is virtually open 24/7 and is totally global. Basically wherever you are in the world you can be trading the forex market.

 As traders we have access to live trading using charts set at various time frames. And it is these time frames that change our perspective of what is happening on the markets.  Let me explain if two traders are discussing the trend for the EUR:USD until they know what time frame each of them is trading in their perspectives of what happened that day are going to differ.

For the trader using 1 and 5 minute charts  the dollars could be trending up and he could have had several winning trades,  however for someone looking at the hourly or daily charts the bigger trend might well have been down, and of course someone looking at holding onto a trade for  months would have a different perspective.

If you are only looking at the daily charts you are only given 1 bar or candlestick for the day. It will show you four measurements, the opening figure for the day, the highest point, the lowest point and finally the closing figure for the day. If you are looking at short term trades this detail is obviously not enough and you need the 1min and 5 min charts.

When you first begin trading and you are still working through you system, I would suggest using the 1 hour and 15min charts. The shorter time frames have so much detail and are changing so fast it could be overwhelming for the beginner. Studies have been done and it has been proven that there is no time frame that consistently earns more money for the trader. It all comes back to when it suits you. Naturally if you want to sit in front of a screen monitoring your trades you are going to use a shorter time frame than someone who wants to set and forget it.

On point if you want to trade using very small time frames it is very important to know where to place your stops. Often people are advised to have stops very close, unfortunately with the way the market moves you can be stopped out frequently and although they are only small losses the cost with the spread can add up.

Source by Lyndsay Wilkinson