If you read The Guide To The Ultimate Trading Plan, available for free on the site, you probably learned that the first step in creating a trading strategy is to perform research in order to find one that will work for you. In order to work for you, your strategy must be compatible with your desired lifestyle. The process of researching a strategy isn't that complicated but it may take time. To break down the process, we'll look at each element of a strategy starting by the selection of the trading time frame. Let me tell you how I picked the chart time frame I trade today.
The first Forex chart I opened was a 30-minute chart of the EUR/USD. At that time, I didn't even know it was possible to change the timeframe of a chart…but that's another story.
What's the chart time frame?
If you've looked at other articles on my site such as Getting Started Trading Forex or if you read a little bit about trading, you probably came across the term “chart time frame”. What this represents is the duration of the candle displayed. As a simple example, a candle will close and a new one will open next to it every 4 hours on a 4 hour chart time frame. There's nothing complicated. The higher the time frame, the less you need to check out the chart because nothing will be different until the close of the candle.
As I was looking at my 30-minute chart, the price seemed to be moving so fast. I was amazed because that means I could make profit extremely rapidly. I always liked the idea of entering a trade and staying in it for a few minute or a few hours and get out with a profit. For that reason, I decided to switch on the 5 and 15-minute time frame. This is a lot more stressful to trade but I still liked it. As a result, for the next few months, I traded on these timeframes. However, trading on the 5 and 15-minute chart is quite time consuming. The trader must constantly be in front of his computer because new candlesticks get formed very often. That was a problem for me as I was a university student who needed to stay focused in class, without looking at currency charts.
I then decided to give something else a try to see whether I would be able to get more free time. I started trading the daily chart. With that, a new candlestick appeared only once at the end of the trading day (5 pm Eastern time). Although trading a higher time frame such as the daily chart was a little bit more boring than trading a very low time frame, it was more congruent with my vision, which is to travel around the world, be active and live life at its fullest.
Over the months, however, I wanted something in which I could be a little more involved than trading only the daily chart. For that reason, I started trading the 4-hour time frame. Since the 4-hour chart displays 6 candles per day, I can take more trades and still preserve my reduced stress level. This allow me to keep a balance between certainty and fun.
Here are key elements in order to pick the right chart time frame to trade:
- You must be comfortable to trade the time frame your strategy is based on (remember: lower time frame means more stress, less comfort & more time trading).
- You must understand that higher time frames vary more. This means that you may be at -100 pips on the daily chart but come back profitable afterward. On a lower time frame such as the 5-minute chart, the variability is lower.
- You must pick a chart time frame that allows you to do whatever else you want to do in life.
Let me know below what time frame you are trading on. Why trading that specific time frame? If you have any question or want to get involved, let's connect on social medias or fill-in your email below.