What Time Frame Should You Trade Forex?

In forex trading, the time frame you use plays a key role. It will vary for each trading strategy, whether you’re aiming for quick, small gains that require constant monitoring or you don’t want to look at your portfolio every day.

Other factors to consider when asking yourself, “What time frame should I trade forex?” include risk tolerance and your experience level. This guide will explore the four basic time frames and which one makes the most sense for you to help boost your long-term returns.

Why Time Frame Matters in Forex Trading

The time frame you use determines which charts and technical indicators you prioritize. A smaller window lets you confirm trends and reversals that you can’t confirm with a larger window. 

Time frames aren’t just about technical analysis, however. They also allow you to craft strategies that align with your risk tolerance and trading frequency. 

Traders with higher risk tolerances and deeper commitment can consider scalping and day trading forex. These strategies require shorter time frames between entering and exiting a position. Some traders set up bots to perform these strategies when they aren’t able to check their portfolios every few minutes. 

If you’ve got a full-time job, however, and can’t check your screens as often, you’ll have to use a long-term forex strategy like swing trading and long-term investing. 

Regardless of which strategy you choose, it’s important to create one that’s detailed and stick to it. You can establish technical setups that determine when you will enter and exit positions. These criteria will allow you to make strategic choices that focus on numbers instead of emotional decisions that can result in entering or exiting a position too late. A single bad trade can wipe away all of your profits for the day.

Overview of Common Forex Time Frames

Forex trading consists of many factors that can differentiate one trader from another. Although there are some variances, most forex traders will fit into one. Here are the four forex time frames explained:

Scalping (1-Minute to 15-Minute Charts)

Best for: Full-time traders with high discipline

Scalping is a rapid-fire forex time frame that rewards quick price movements and large trading volumes. This strategy is only suitable for full-time forex traders who rigorously uphold their trading strategies. 

These traders often use margin to get more exposure to forex positions with less capital. They borrow money from brokerage firms to maximize how much they gain from high-volume trades if they correctly predict an asset’s price movement.

Scalpers usually enter and exit large forex positions within 15 minutes. They want quick, small gains that can compound over time. However, a bad scalp trade can make it harder for a scalp trader to recover by the end of the day. This strategy requires the most time, effort, and knowledge.

Day Trading (15-Minute to 1-Hour Charts)

Best for: Full-time traders who want higher profits per trade

Day traders are also active in forex markets, but these individuals get a little extra time before exiting positions. Day traders use 15-minute to 1-hour charts to anticipate future price movements. They have more time for a trading pair to recover if it initially starts in the red.

Day traders can also ride rallies better than scalpers since they hold currency pairs for a little longer. They can generate higher profits per trade, but they also make fewer trades than scalpers. Day traders may also boost their activity on the best trading hours of a given day.

Day traders close out their positions by the end of the day, so they aren’t vulnerable to after-hours price movements. They often use margin to amplify their returns when the market is open, but they aren’t stuck with a loan balance by the end of the day.

Swing Trading (4-Hour to Daily Charts)

Best for: Part-time traders who keep tabs on the forex market

Swing trading offers more flexibility if you understand forex markets but have a full-time job. While making trades every four hours may be unrealistic, some swing traders hold their positions for several days before making the next move. A few swing traders even hold their positions for a few weeks.

It won’t be surprising to learn that swing traders still conduct technical analysis when reviewing their positions. However, fundamental analysis becomes more important as you stretch out the time frame for each trade. Fundamental analysis requires knowledge of both currency pairs, along with their potential catalysts and weaknesses.

You will have to be more knowledgeable about each currency you trade, since government decisions, economic reports, and geopolitical news are some of the components that will impact your profits. Scalpers and day traders can navigate these news events more easily since technical analysis is their main focus.

Position Trading (Daily to Weekly/Monthly Charts)

Best for: Long-term investors who don’t want to look at their portfolios each day

Position trading is suitable for investors who have full-time jobs and can’t commit to day trading. It’s also good if you don’t want to be bogged down in technical analysis or stuck in your portfolios all day.

You can still benefit from using technical analysis. Daily, weekly and monthly charts are useful for position trading. However, fundamental analysis becomes far more important than technical analysis for long-term positions. Investors have to consider what a currency may look like in a few months or years instead of looking for slight price fluctuations throughout the day. 

You don’t have to spend as much time monitoring your portfolio. If you want to grow your money on the side without the same level of commitment as day traders and scalpers, this time frame may be a good option.

How to Choose the Right Time Frame for You

The right time frame varies for each trader. Some traders have high risk tolerances and enough time to make scalping work. However, if you have a lower risk tolerance and less time to conduct trades, then position trading may be your best choice. 

It’s also important to assess your ability to stick with your trading strategy when things don’t work out. If you are prone to making emotional decisions, it’s good to make forex trades that have lengthier time frames. People who don’t let their emotions get to them under pressure may be more suited for day trading and scalping.

Luckily, you don’t have to throw yourself straight into forex markets without a plan. You can use demo accounts with paper money to test which forex trading strategies by time frame work best for you. You can give short time frames like scalping and day trading a try. That way, you can monitor how you feel during each trade and check your returns. This practice will leave you better prepared for the real forex market and confident about your time frame.

Using Multiple Time Frames for Better Confirmation

You don’t have to feel locked in to any single time frame. Some traders change their minds as new data arrives or use multiple time frames within their trading strategies. For instance, you can use a lengthier time frame for trades that prioritize trends. However, you can also use day trading and scalping time frames for other positions.

Some day traders still have long-term positions. You don’t have to fully commit to a single strategy as long as any changes you make are not driven by your emotions. Some forex traders use shorter time frames when entering positions and wait for several days, weeks, or months before selling a position.

Final Thoughts: There’s No One-Size-Fits-All

Forex traders can apply several strategies to capitalize on short-term and long-term price movements. Scalpers, day traders, swing traders, and position traders all have the same goal of making a profit. It’s okay to adjust your strategy over time and regularly refine your approach based on your performance and risk tolerance. The best forex traders regularly tweak their strategies to ensure they are maximizing every dollar they deploy into the forex market.

Frequently Asked Questions