Most traders and analysts will agree that trading time frames can be broken into three broad categories. These time frames are typically known as the short, medium and long term time periods. The first thing that seems important to note about this terminology is that each of these time frame categories does not have a precise definition among forex traders, other financial market participants and authors.

Perhaps the best way to explain this variation is that the time periods these commonly used terms refer to tend to depend on the usual time a position is held given the type of trading strategy that a trader employs. Hence, if a trader uses a trading strategy that tends to have a relatively short holding period, like a day trading strategy , for example, where all positions are closed out prior to the end of the trading day, then the length of time associated with each time frame term will be proportionally shorter than the length of time for a swing or trend trader, for instance, who might hold positions for a considerably longer period.

Selecting the Perfect Trading Timeframe as a Forex Trader

Although trading time frame terminology is not especially precise, it can nevertheless help to get a general understanding of what phrases like long term, medium term and short term actually mean to traders who use different trading strategies. For example, the time period that each of these categories tends to cover that is most relevant for day traders, who generally seek to close out trading positions the same day they were initiated and so do not usually hold positions overnight, can be described as follows:.

In contrast, swing traders are those who look to take advantage of bigger fluctuations in market exchange rates.

They are usually more than fine with holding positions overnight. The time period each of these time frame categories tends to cover that is most relevant for swing traders can be described as follows:.

Financial institutions move the price

Finally, those engaged in long term foreign exchange trend trading or foreign currency investment activities tend to have a much lengthier time frame that they are willing to hold positions for. When a technical forex trader is analyzing exchange rate data for a particular currency pair, they will often view this information in the form of close, bar or candlestick charts that are plotted at several different time frames or intervals.

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The RSI is shown in the indicator box below in pale blue, while the day moving average is superimposed over the exchange rate in red. Some of the most common incremental time frames used by technical analysts when reviewing exchange rate movements for forex currency pairs include the following:. In addition, some very short term traders like scalpers might look at tick charts, which do not have a particular fixed time interval between data points.

They instead show a new data point every time a certain number of trades take place or some other measurable criteria is fulfilled. A number of different strategies with varying timeframes are typically employed by forex traders.

The timeframes for holding positions in the strategies to be mentioned below vary from less than a minute for scalp trading, to weeks or even months for long-term trend trading. Fewer transactions mean fewer times to pay the spread. More time to think through each trade. Bigger account needed to ride longer-term swings Frequent losing months. Short-term traders use hourly time frames and hold trades for several hours to a week. More opportunities for trades.

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Less chance of losing months. Less reliance on one or two trades a year to make money. For long-term trading, discipline is key, but so is patience. Long-term traders must also be interested in a wide variety of factors that influence the markets and have a good understanding of political and economic events. Share this. And which approach should you use? Why traders use Skrill. What is short-term trading?

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In general, short-term trading refers to trades made over a period of seven days or less. Pros of short-term trading There are a number of benefits of being a short-term forex trader. You can trade on a large number of opportunities when currency rates change, meaning that you can capture every swing.

Best Time Frame To Trade Forex - Give Yourself A Huge Advantage

Your margin capital is locked only for short periods, making it easier to withdraw it at short notice. In long-term trading, your money gets caught in positions for months. The majority of forex trading signals work only for short-term trading. Usually, both technical and fundamental signals offer trading opportunities that disappear in several hours.

The number of signals and events that influence currency rates long term is small. Cons of short-term trading Short-term trading demands a lot of your time.