Choosing A Time Frame In Foreign Exchange

The forex traders who have finalized the trading strategy and want to use charts for trading analysis need to determine which time frame in foreign exchange will be most suitable for them. Every trader, regardless of his/her trading style is likely to use multiple foreign exchange time frame setup, while making trading decisions; however, a trader’s time horizon will play a big factor in which he is choosing a time frame in foreign exchange. Choosing the time frame in foreign exchange which is appropriate for you is almost as important as the type of market action and strategy you want to trade.

After picking a foreign exchange time frame in which you want to trade, you need to collect the relative data to move ahead. You can collect the three general types of data: the intra-day, daily, or weekly. These days most of the charting packages allow a trader picking a foreign exchange time frame; one week, one hour, fifteen minutes, two minutes….whatever. Although a trader can virtually choose any time frame, it makes sense only to use conventional foreign exchange time frame. The idea here is that if you are the only trader who cares what a fifteen minute chart looks like, it is likely the chart patterns at that time frame won’t be meaningful. This is the reason why, most of the currency exchange traders stick to rather conventional time frames like one month, one week , one day, and so on.

The most common chart used by foreign exchange currency traders is the daily chart. These are most preferred time frame in foreign exchange because of various reasons like most traders are busy as they have day jobs, however, they want to remain updated and in touch with the forex trading market as much as possible without it intruding into their workday. The daily chart is perfect for this type of trader. Because this allows traders to review the markets every night and traders can then make their decisions for the next day.

The forex weekly charts are considered to be much more difficult to trade because it requires more discipline. In order to trade in the weekly time frame in foreign exchange, you need to take your decisions on the weekends and you can’t carry out any changes until the next weekend. This is quite difficult and inconvenient for majority of the traders in forex trading. It is very easy to yield to temptation and move a stop loss. It is a real hard thing not to look at the market during the week. Many traders don’t think of choosing a time frame in foreign exchange which is based on weekly charts. However, experts believe that there is a lot of money to be made trading weekly charts, simply because so few traders are able to do so. To make money in the markets, you have to trade when the average trader is not trading.

The intra day foreign exchange time frame is five, ten, thirty and sixty minute charts that are compiled from intraday tick data. To trade intraday charts, a trader needs to focus his full attention to the markets during the day. Otherwise, it is virtually impossible to have a full-time job and trade intra-day charts well. As a percentage of traders, relatively few traders are able to trade during the day. This is one of the reasons that there is significant money to be made trading intraday. The relative lack of competition has to be in your favor trading intra-day. The advantage of intra day time frame in foreign exchange is it allows you to put a microscope on daily activity and filter trades so that you can take advantage of the intra-day timing.