Everyone knows that hindsight can be 20/20.
You can see the exact moment when you would have made the most profit by looking at the chart of a stock. Would you only know the next move and not just after?
The puzzle of determining the best trading timeframe can cause inexperienced traders to lose sleep. They use technical indicators and charting techniques in order to be the first ones to see the next breakout.
Professional traders are aware that they should not worry about the price movements. Instead, they concentrate on maximizing profits and minimizing losses. They know that using different time frames for analyzing an asset can make all the difference.
It’s like night and day, the difference between viewing an item on a 1-minute or 1-week timeframe. The best timeframe is one that is best suited to your trading strategy.
This article will explain what trading timeframes are and which ones work best for the most popular day trading strategies.
Swing Trading, Day Trading, and Scalping: The Three Approaches
We need to start by understanding the basics.
There are three main trading styles, each with a different length of holding a position. Understanding these differences makes it easier to determine which trading timeframes work best for you.
Swing Trading
Swing traders are the longest-term players, as they measure their trading in days or weeks. They are not afraid to hold an asset for a few days and seldom look at time frames shorter than four hours. They are interested in trends that occur within a daily period.
Swing traders evaluate assets using technical or fundamental analyses and can imagine future price movements. They are always on the lookout for news, and they need to be tough when it comes time to deal with overnight price changes.
Swing traders manage their risk by keeping a close watch on the total exposure of their portfolio. They also avoid getting swept up in emotional trading when prices “swing.”
Day Trading
The golden rule of day trading is to close out all positions before the end of the day. Day traders look at the hourly time frames, and then use the 4-hour frame to search for trends. They trade multiple times a day, and they prefer stocks that have lots of intraday movement.
How do day traders decide on the best timeframe to trade in? To plan their trades, they use a combination of technical analysis and chart patterns as well as the 24-hour news cycle. Day traders use stop loss orders to manage risk.
Scalping
Scalpers are the fastest and most alert traders. Scalpers hold assets for a maximum of a few hours. They prefer time frames such as 1 minute, 5 minutes, and 15 minutes.
Scalpers can execute hundreds of trades per day. They rely on chart patterns and technical indicators to guide them. Scalpers use aggressive stop-loss orders and quick exits.
What are trading time frames?
The information that traders gather from their platform is vital to them. Trading time frames, or time-based candle charts, offer the most valuable information.
Candlesticks are a popular chart that shows the opening, closing and high prices of an asset. Time frames are just that: a period of time.
Most common trading timeframes include:
- Chart for 1 minute (M1)
- Chart for 5 minutes (M5)
- Chart for 15 minutes (M15).
- Chart for 30 minutes (M30).
- Chart for 1 hour (H1)
- Chart for 4 hours (H4)
- Daily (D1) Chart
- Weekly (W1) Chart
- Monthly (MN). Chart.
You can see in the chart how two different trading timeframes present price movement.
Apple (NASDAQ: AAPL) is the stock in question. You can see the chart (D1) on the left showing a consistent upward (bullish trend) over a number of months. If you zoom in, you can see that the stock is going sideways on a 5-minute (M5) chart. This leaves little room for scalpers.
Professional traders use timeframes to help them:
- Trends can be identified and confirmed.
- Align strategy.
- Manage risk.
Smart traders are those who use multiple timeframes in order to separate the signal and noise of an asset’s movement. You can see from the Apple example that if you zoom too closely, you may miss out on bigger opportunities. If you look only at the overall picture, you may miss the volatility, which is small but essential, that makes scalpers tick.
Smart traders take the time to learn.
Imagine the pressure of getting a scalping deal right when every second counts. Imagine the frustration of misinterpreting the candlestick chart and losing the trade. It is not the place to make mistakes.
You will lose valuable capital if you do not have your stop orders set up correctly or if you miss the ideal trading window.
Education is the key to becoming a professional trainer who doesn’t blink even when adrenaline takes over. Real trading has developed a structured platform that teaches novices and professionals alike how to master risk management and execute trades in a disciplined manner.
With training, it is not necessary to guess when the best timeframe for trading is. You must be calm and disciplined when you execute, whether it’s scalping for minutes, hours, or even the whole day.
Our coaches mentor and teach every trader how to respect the time, but not to fear it. Our coaches help you practice without risk on our TMS ™ Simulator so that mistakes are not losses, but lessons.
With our training program, you will learn how to be both smart and prepared.
Let’s return to the question of which trading timeframe is best for you.
What are the best time frames for each trading approach?
We recommend that each trader look at a trade from different angles.
You risk missing essential insights or incurring unnecessary losses if you focus on only one way of evaluating the market, or if you ignore a variety of time frames.
Direct access is essential for trading with shorter time frames. The results of a delay in your trades could be disastrous.
You will need to choose different time frames for trading depending on your trading strategy.
Timeframes for Scalpers
- 1 Minute (M1) Chart: This chart provides the most detailed view of the price movement. It is one that scalpers should track.
- 5 Minute (M5) Chart: This time frame is helpful in identifying short-term trends. It offers a higher signal-to-noise ratio than M1.
- 15-minute (M15) chart. Although some scalpers may look at the chart for the 30-minute period, the chart for the 15-minute period offers a helpful overview with the granularity scalpers need.
Time frames for day traders
- 5 Minute (M5) Chart: offers granularity for day traders without creating too much sound. The M5 chart is essential for identifying trends and entry and exit points.
- 15-minute (M15) chart. Here’s where traders can see the broader trends developing, mainly if used to confirm signals that appear first in the M5.
- 30 Minute (M30).M30 chart is crucial for planning trades which could last several hours. It provides a high level view of the support and resistance levels day traders should be watching.
- The 1-hour chart (H1): the 1-hour chart helps day traders to look at intraday movement and spot bigger trends that may even spillover into the following day.
Swing Trading Timeframes
- 4 hour (H4) chartthis timeframe is the shortest that swing traders will use. This chart is good for intraday movements and can be used to make entry/exit decision.
- Daily chart (D1): The D1 chart lets traders keep track of the big swings that may occur overnight. This chart is suitable for detecting early trends.
- Weekly Chart (W1): W1 helps identify support and resistance levels, which are more critical than intraday movements.
- Monthly chart (MN): This is the broadest scope used by short-term traders. This chart offers swing traders a nice balance between the relative granularity provided by the H4 and the D1 charts. We’re already discussing long-term investment if we go beyond this.
You can see that different time frames are used for various things. It’s essential to take into account all of them. Do not be afraid to look at other time frames than the ones you would typically use. You can get valuable information that will help guide your trading.
Multi-timeframe analysis can be used to your advantage.
Trading time frames are like using a telescope for the moon. You can see more details the closer you look. The value of one timeframe is not more accurate or valuable than another. Instead, the aggregation and accumulation of prices can be used to create a picture that’s conducive to specific strategies.
Beware: focusing on one time period can lead to a false sense of certainty and cause you to misread data.
Multi-timeframe Analysis (MTFA) is a tool that can help you do this. In MTFA, there is a concept called the rule of three. Before placing a trade, experienced traders will usually examine a stock using the largest of three timeframes.
Imagine that you are a swing trader and you want to make a trade with a stock you don’t know. Start by examining the W1 timeframe and using a few trusted technical indicators in order to find strong signals. You then move on to the D1 chart and perform the same analysis. Before making a decision, you finish your study with H4.
MTFA can help you to identify primary or longer-term trends, as well as intermediate or medium-term trends and immediate (short-term) price movement. After you’ve added support and resistance levels to the different time periods, it will be easier for you to determine your entry and exit points.
A real-world example of MTFA
On the chart below for 1 minute, you can clearly see that Microsoft’s (NASDAQ: MSFT) shares are in a bearish trend. It fell below the VAP and the $329 crucial resistance level. It formed a rising wedge pattern. This indicates a bullish turn when the wedge reaches the confluence.
On the 15-minute chart you can see the Microsoft stock dropped below the VWAP. The stock is approaching the $326 important support level. In this situation, a trader could place a short trade with and set the take-profit order at $326.18.
It is a good idea to use MTFA in every trade. This is not the only way to prevent bad trades. But it’s as cheap and easy as checking your mirrors before changing lanes.
Now is the Time to Make Real Profit
Trading timeframes successfully is not something that you can do in a day (pun intended). Professional traders use this tool to analyze and incorporate into their trades. It becomes a part of your trading strategy the more you use it. You will be able to identify opportunities and avoid situations.
You can practice without risk using our TMS ™ Simulator while our coaches guide and instruct you.
- Learn from your mistakes.
- Optimizing entry/exit for the time period you choose.
- A pro prioritizes skills over emotions.
Do not waste your time trying to figure it out on your own or figuring out when to trade. Real trading teaches you to trade faster, smarter, and easier.
