What is the optimal time frame for trading?
It everything rests on YOU, just like everything else in life.
Do you prefer to move slowly and take your time with each trade?
Perhaps you are better suited to trading on longer time frames.
Or do you prefer the thrill of fast-paced action?
The best time frame for trading depends on an individual trader’s goals and trading style. Some traders prefer to trade intraday, taking advantage of short-term price movements, while others prefer to hold positions for a longer period of time, such as several days or weeks, in order to capture larger price movements.
Day traders, for example, might focus on the 1-minute or 5-minute charts, while swing traders might use the daily or weekly charts. Position traders, who hold positions for a longer period of time, might use the monthly or yearly charts. Ultimately, the best time frame for trading will depend on an individual trader’s risk tolerance, investment objectives, and market outlook.
It’s important for traders to experiment with different time frames and to choose the one that works best for them based on their own goals and preferences.
In the table below, we’ve highlighted some of the basic time frames and the differences between each.
Long-term traders will usually refer to daily and weekly charts.
The weekly charts will establish a longer-term perspective and assist in placing entries in the shorter term daily.
Trades usually from a few weeks to many months, sometimes years.
Don’t have to watch the markets intraday.
Fewer transactions mean fewer times to pay the spread.
More time to think through each trade
Large swingsUsually 1 or 2 two goods a year so PATIENCE is required.
Bigger account needed to ride longer-term swings
Frequent losing months
|SHORT-TERM (SWING)||Short-term traders use hourly time frames and hold trades for several hours to a week.|
More opportunities for trades.
Less chance of losing months.
Less reliance on one or two trades a year to make money
Transaction costs will be higher (more spreads to pay).
Overnight risk becomes a factor
Intraday traders use minute charts such as 1-minute or 15-minute.
Trades are held intraday and exited by market close.
Lots of trading opportunities.
Less chance of losing months overnight risk
Transaction costs will be much higher (more spreads to pay).
Mentally more difficult due to the need to change biases frequently.
Profits are limited by needing to exit at the end of the day.