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FOREX STRATEGY

Selecting the Right Time Frame to Trade

forex strategy which time frames for trading

Most technical traders understand the importance of selecting the correct time frame for a trade. A quick review of price charts that vary by a factor of ten clearly shows how very different things can look in various times. For example, it is not uncommon for the “trend” to be up in one time frame and then down in another time and up yet again in the next time frame.

How should the trader select the proper time to trade? There are many different answers to that question.

Generally, the time frame on which a trade is constructed should be selected to fit the individual trading method. For example the shorter the time a trade is anticipated to take, the shorter the time frame of the chart used to enter that trade should be.

Most technical traders enter a market in anticipation of profit within a limited period of time. All markets oscillate up and down in price over time. So the first decision a trader needs to make is: How long do I expect to be in the trade? This decision will likely dictate the time frame(s) used in executing the trade.

I will describe my way of setting up my trading charts for my particular short term trading method. This method works for me and you can at least use it as a guide in selecting your own trading time frame.

First, I prepare a weekly price chart of each market that I expect to trade.  I do several things on this chart, shown in Figure 1, but for our purposes here, simply note that the trend has been up for almost a year but appears to be changing (the white dotted lines are 21 period Bollinger Bands). We would expect this to exert downward pressure on prices on the daily chart.

forex strategy-which time frames for trading EURUSD Weekly Data Chart

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