Traders, back again with the Finex Glossary article.
This time we invite you to find out more about an important aspect of trading, namely the time frame or time frame.
What is Time Frame?
The time frame in Forex trading is a chart of the time period that we specify when opening and closing positions. The time frame is divided into long-term, medium-term, and short-term.
On the MetaTrader 4 trading platform, time frame can be selected in the following:
- M1 (one minute)
- M5 (five minutes)
- M15 (fifteen minutes)
- M30 (thirty minutes)
- H1 (every hour)
- H4 (four hours)
- D1 (daily)
- W1 (weekly)
- MN (monthly)
What is a Pip and How is It Calculated?
The time frame label shows the time period that a single candle refers to. The larger the time frame we choose, the longer the time interval covered in one candle.
In addition to the time ranges mentioned above, we can also choose other time frames outside the standard such as three minutes (M3) or two hours (H2). You can create your own time frame manually on your MT4 platform.
The application of various Forex time frame can help traders to read trends and price movements in more detail. Not only specific time frame, but we can also apply multiple time frames at once to analyze currency pairs.
Long-term time frame are suitable for those who apply a position trading style. The trend highlights more weekly charts with daily triggers.
The medium-term time frame is suitable for swing traders with a trigger period of four hours.
While the short term time frame is the daily period, for those who are involved in day trading. The short term time frame trend is every four hours with hourly triggers.
What is the Best Time Frame?
There is no right answer to this question, because it all depends on your approach.
How to Install Stop Loss and Take Profit
Some traders prefer to trade within a period of one day by opening multiple trades. Other traders make one to two trades during the period, while some only trade once a week. So before choosing a time frame, first determine which type of trader you are.
However, as a reference from the sources we have summarized, intraday traders often use the M30 and periods above it. This time frame is considered better than the other way around (under M30). Why?
The main reason lies in the significant influence of the so-called “market noise” prices on smaller time frames. Market noise is a large number of low volume transactions in the market which randomly affects prices in the short term. It is quite difficult to predict the impact of market noise.
The market is usually affected by market noise on the M1 time frame most of the time. The condition is that the market has no trend, and prices move chaotically and with confusing dynamics.
Time frames such as M30, H1, and H4 are suitable for beginner traders who are getting used to trading regularly. Technical analysis and indicators provide adequate information on this time period. On the other hand, you do not need to wait for a signal to open a long-term position.
Another important advantage of such time frame is that traders can measure the profitability of their own strategy on a demo account in no time. Therefore, its practicality is very feasible to apply.
Multiple Time Frames
As mentioned earlier, you can use multiple time frames at the same time, depending on the market situation you are in or what is happening.
For example, when important economic news is released, you can reduce the time frame to get a precise transaction. Then you can increase it if there is a possibility of a long lasting and flat market.
In the use of multiple time frames, generally three-time frames are used.
The first time frame, as a trendsetter and signal. Usually, the time frame used is the 4-hour time frame (H4) or the daily time frame (Daily).
Then there is the second time frame, as a signal confirmation. In this second time frame, the time frame used is mostly 1 hour (H1).
While the third time frame is a place to make entries. The time frame used is usually a short time frame such as a 5-minute time frame (M5), or a 15-minute time frame (M15).
The following is an Example of Using Multiple Time Frames:
The last thing to remember, you shouldn’t just focus on choosing the time frame. This is the first step. With time and regular practice, you’ll find the time period that works for you.
With Finex always, we are ready to help you become the trader you want to be.
Continue to profit with Finex!