Most Forex traders have no idea of how or why Forex prices move and make key errors in the way the time frames they trade. In this article, we will look at three popular time frames and see which is the best time frame to trade in your trading strategy.
In Forex markets, all the fundamentals supply and demand news will be shown in the price action and so to will the views of all the traders, so lets break the price action down into 3 time frames.
Long Term Trends
The big trends in currencies which last for a few weeks to many months and they reflect the economic and political health of the country's currency. These big fundamentals change slowly from expansion to contraction and that's why these trends last so long.
Intermediate Term Trends
While the big fundamentals prevail over the long term, in the shorter term traders emotions can spike prices to far up or down and these can be seen in intermediate trends, within the big trend which can be either with the major trend or opposite to it. Typically, these trends will last a few days to around a week.
The Short Term Trend
This is the action within a day and is really not a trend at all its simply random price action. In a day prices can go anywhere and they do.
Which is the Best Time Frame to Trade?
From the above its clear that trading the long term trends can give you the biggest amount of profit with the least amount of work. All you do is get in on the trend and hold it - but long term trend following, only really suits a trader who is patient and disciplined.
Trading the intermediate term trends can be very profitable and requires less patience and discipline than trading long term trends. You can make money in both time frames and the one you choose, will simply be down to your personality.
I haven't mentioned day trading yet and its the most popular time frame to trade in but it offers you no real chance of success. There is a big industry that sells junk robots and other, so called low risk day trading and scalping strategies but they don't make money and day traders lose.
If you want to win at Forex trading, don't make the mistake the majority do and trade short term - trade longer term and you will have the odds on your side and be able to make a great second income.
Source by Kelly Price