14/07/2022
What time frame should you trade? 🎯⏳
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Let's take a look at different trading time frames. What are the pros and cons of each timeframe? The timeframe in which you trade is one of the most important factors in your performance results. We will try to provide clarity for some new traders who may be trading in the wrong time frame based on what they are trying to achieve.
SCALPING
Intraday traders, also known as scalpers, trade the markets on lower timeframes, usually between minutes and hours. Trades are made during a session and usually closed by the end of the day. You will often find that these traders typically have a defined window when they sit in front of the charts and trade without taking their eyes off the screen.
High frequency of trading, great adrenaline, more opportunities in different markets, no risk to take to your pillow while you sleep at night. You also don't rely on one or two big chances for your annual earnings.
Besides these, there are many cons as well. Commissions are much higher when scalping and in rare cases it can even consume your profits. It is an extremely difficult job, mentally and emotionally. In fact, you need to be disciplined enough to make quick response decisions about the risk you will take. As mentioned above, unlike other trading systems and timeframes, it requires a fair amount of time and concentration throughout a trading session, so if you want time freedom, scalping may not be the best option for you.
SWING
The Swing method is a common trading method as many people can do this part time regardless of their career and day to day routine. Swing traders trade the markets on a mid-term timeframe, usually days to weeks. They keep their positions between hours and a week and try to make profits from larger movements in the market.
What are the advantages of swing trading? There is plenty of opportunity, plus plenty of time to sit back and think through your analysis. You can do both your full-time job and continue to trade in the stock market after working hours. It also has much lower trading costs compared to scalping. Spreads and commissions do not consume your profit, as you are targeting larger moves in the market.
What about the cons? Swing trade introduces us to the night risk. You will need to sleep at some point and you may have open positions during this time. This is a risk window where you cannot react to the market. It's also not hard to guess that many people tend to lose sleep when they have open positions. News feeds begin to influence your decision making. You will need to follow the economic calendar. Much more patience is required to stay in positions for a long time. You will need to make decisions without letting your emotions affect your general bias.
POSITION
Finally, let's have a look at position trading. In this system investors tend to follow the markets on higher timeframes, and positions can last for months or even years. Profiting from really big fundamental movements of the market usually takes time!
The advantages of investing long-term are that you don't have to watch the market every day, allowing you to step back and think clearly. Since you have many fewer positions, you have much lower commission costs. You have much more time to think about your trades and react to different news or changes in market bias.
On the cons, long-term investment consists of very few opportunities per year. Fundamental analysis knowledge is required. It also requires great patience and the ability to be a mere spectator in the market for weeks or months. Finally, you will often experience red months because you don't have many trades that could compensate for your negative balance. Stay patient.
Will your trading timeframe really allow you to reach your target? Try each method and choose what works best for you!
I hope this article was useful!
