5 TIPS FOR TIMEFRAME ANALYSIS
Start at the higher time frame to trade Forex - Locate the larger trends, trade direction and trend analysis
After the trend has been determined on the monthly chart (lower highs and lower lows), you can look to trade in the direction of the weekly chart in a variety of ways. It’s great to utilize price action (as seen in our video) for determining trends and/or entering positions, but indicators can be utilized here as well.
As you go through and gain chart time and experience on your chosen time frames, it’s also important to understand the main time frames in Forex that most other traders will be viewing – for example, the daily chart or the hourly chart. These time frames can be the most manipulated in a way to throw traders off, so make sure to build a robust structure for identifying long-term trends.
Until the larger time frame analysis is mastered, beginner Forex traders should generally avoid trading on the lower time frames. As you get used to dealing with the increased market variability connected with the lower time frames, you can become more experienced in trading on the Forex market.
If you need clarity - take step back!
Most traders get lost in too many drawing tools to the point where they can’t see the candles. Remove some of the mess and step out to a higher time frame in Forex to regain chart clarity.
If you feel like you have enough information from a time frame, choose a shorter time frame
Once you are satisfied with your level of analysis on a certain time frame, drop down to get further detail. Ultimately, once you feel comfortable with the longer-term chart, you can then look to move slightly shorter in your approach and desired trade length times. This can inject more variability into your approach. It is important to carry out a plan and identify your perception of a trend before dropping down time frames.
Minimise the number of time frames in Forex
Aiming for three to five time frames will keep your trading at a level where it’s sustainable long term. This will allow you to understand the long-term perspectives without clouding your judgement.
As for the currency pairs you use for Forex trading, you may not need to view the monthly or weekly time frames in Forex every day because a stronger analysis is usually going to last several weeks. But, before each Forex trading session, have a set goal and plan for the time frames you intend to use to discover the information you need to make better trading decisions.
Do not go below the hourly chart
Staying above the 1-hour time frame will lead to more understanding and a better trading experience for your mental well-being. Whilst certain strategies and tactics work below this time frame, if any traders do venture below it, they will discover the mental strain and huge disadvantages that going below the hourly chart can cause in the short term.
Be an all-around trader and repeat many similar trades over and over with low risk. Gather a large sample size of trades on similar time frames and iron out spots where they can be adjusted. Do not put yourself in a box, as many traders either jump on the side of ‘day traders’ or ‘swing traders’. Be both and stay on your toes.
Forex Traders UK is passionate about educating traders about winning trading strategies. In addition to articles on technical analysis, we also write about technical mindset and other Forex-related topics. Subscribe to our newsletter to keep informed about our newest blog posts.