Learn About The Time Frames In Trading

As a trader, you must have come across the term ‘timeframe’ at some point in your trading career. Many traders often wonder when to trade and what timeframe is suitable for them. Not knowing the timeframe before starting a trade can be lethal. So as a trader, the first and foremost that you need to do is find out your proper timeframe.

What is a timeframe?

The timeframe is a particular duration when something previously planned takes place. In trading language, the time frame is the period when the price value of a financial instrument changes. So, it is very important to understand when the price might change to make a call while trading. You might be waiting for the price to go higher to make a bigger profit and according to your speculation, you think the price will go up. For that reason, to make a trade you first need to know when the price will change. That’s where the timeframe comes in. It gives you the probable duration that the trend will remain stable for.

There are two types of timeframe.

The first one is the lower timeframe ranging from 1 minute to 15 minutes. The second one is the higher timeframe in which the duration may be from 1 hour to a day.

How to choose a timeframe?

Now, choosing a timeframe is very important and it should fit with your trading style. If your trading style doesn’t fit your chosen timeframe, you can lose a big deal of money. Check over here and read about the importance of selecting the right timeframe for your trading.

For example, if you are a day trader, using short time frames may not be suitable. A day trader often cannot remain engaged in trading constantly. But lower timeframes require constant monitoring to make a profit.

Lower timeframes give traders more trading opportunities but it is not recommended for novice traders as the price changes pretty dramatically in this frame. Since the price movement in this timeframe is quite fast, it is often risky for traders to trade in this timeframe. It also requires regular monitoring so that a trader doesn’t lose a single chance of profiting. So, if you cannot manage to spend long hours in trading, then a lower timeframe is not for you.

A lower timeframe is mostly preferred by an experienced trader who can give a sufficient amount of time for their trading and wants more trading opportunities to deal with.

On the other hand, in higher time frames, prices move at a slow pace giving the traders the chance to think carefully and calculate their numbers before coming to a decision. So, this timeframe is most suitable for day traders or swing traders. You also don’t need to do constant monitoring in the higher timeframe.

However, the higher timeframe has little opportunities for scalp traders who trade on a long-term basis.

These timeframes are needed to better understand the market. It is like zooming in and zooming out. In the lower timeframe, traders look at the values changed within a short time to understand what the market would look like shortly. On the contrary, the higher timeframe is like a big picture where traders only need to know the present price values to make their deals. Lower timeframes are used by long-term traders for better market analysis.

Now both the time frames have their distinct features and provide varying facilities to the traders. However, it is only applicable when you use it properly. If you are a day trader and you are using a lower time frame then you may not make much out of it. For you, using a lower timeframe may become a bit stressful and risky. So, in conclusion, no matter what type of trader you are, if you are looking for bigger wins, you should always remain cautious about the timeframe you choose.