Lesson #58 The Different Types of Time frame

Is one better than the other?

Actually the option depends on you!

Allow me to provide you with a breakdown of the three to help you to decide:

Long-term

Description

Long-term traders will more often than not consult daily and weekly charts. The weekly charts will determine the longer term perspective and aid in placing entries in the shorter term daily. Trades usually from a few weeks to many months, sometimes years.

Advantages

No need to pay attention to markets intraday. Not many transactions means less paying of spreads.

Disadvantages

Huge swings which require huge stops. Usually 1 or 2 good trades a year so persistence is required. Bigger account required to ride longer term swings. Frequent losing months.

Short-term

Description

Short-term traders draw on hourly time frames and take trades for a number of hours to a week.

Advantages

Extra opportunities for trades. Fewer chance of losing months.

Disadvantages

Higher transaction costs (more spreads to pay). Overnight probability becomes a factor.

Intraday

Description

Intraday traders use minute charts such as 1-minute or 5-minute. Trades are held intraday and exited by market close.

Advantages

Lots of trading opportunities. Fewer chance of losing months. No overnight risk.

Disadvantages

Transaction costs will be much higher (more spreads to pay). Mentally more difficult due to regularity of trading. Profits are regulated by needing to exit at the end of the day.

The option of selecting the correct timeframe is clearly up to you.

The amount of capital you would trade should be taken into consideration. Shorter timeframes lets you make better use of margin and have tighter stop losses. Longer timeframes have need of a bigger account so you can cope with the market swings without being drawn against a margin call.

The fun sets in motion when you have ultimately chosen your ideal timeframe. This is when you begin looking at various timeframes to assist you in evaluating the market.