Time Frame Trading – Best Trading Strategies
Want to find out what time frame trading is? Should you trade with or without time frames? Which is the best way of using time frames in your trading strategy?
If you’re reading this, these are all questions you have probably asked yourself at one point or another! These questions can be overwhelming, but you shouldn’t worry – you’re in good hands!
We’ll teach you everything you need to know about using time frames. Soon, the process will be so simple, you’ll be trading like a champion in no time!
What is Time Frame Trading?
First off, the basics – what exactly is time frame trading? A trading strategy that uses time frames is a type of strategy where traders track assets like securities across several different timeframes that could be as short as a few minutes or as long as a few weeks.
For example, a trader who is interested in Asset A will use this type of strategy by analyzing Asset A through different time frames. The trader will look at the larger trend on a 1-hour chart (an Intermediate Time Frame) and search for a price change beyond the asset’s typical range on the shorter 5-minute chart (Short-Term Time Frame) to decide whether they should enter a trade.
Key Takeaways
Time frame trading is a technique where traders identify potential entry/exit points based on the timeframes of different charts.
One time frame can reveal information that another cannot.
Successful time frame trading requires the analysis of several different time frames.
Trading with a strategy that uses time frames can be complicated – it requires the analysis of several different time frames. This is why the strategy is also known as the Multiple Time Frame technique.
Traders should prepare to accept losses if asset prices move in the opposite direction of their expectations. Investors should also become familiar with technical indicators such as moving averages, support and resistance levels, the relative strength index (RSI), and other chart patterns.
Some of the most used time frames are:
1
minute
5
minutes
10
minutes
15
minutes
30
minutes
60
minutes
4
hours
24
hours
7
days
Although time frames seem quite simple, you should be aware of the risks associated with them. Opening and closing positions in this way can generate very successful results, however, it’s always possible that you can face losses if the market does not move in your favour. Traders must also be aware of the impact of market news and other external factors on the asset price, do their research, and remain disciplined, just like they should when they adopt one of the momentum trading strategies (strategies that involve using an asset’s momentum to your advantage for those wondering what momentum trading is).
When it comes to using timeframes, the technique can be best for both long-term position trading and short-term position trading.
Need to know what these are exactly? Read on!
The Long-Term Position Trading strategy
So, what exactly is a Long-Term Position Trading Strategy? In its simplest form, it is when you buy an asset and hold it for an extended time frame as long as several weeks, months or years. This elongated period allows for the chance of greater profit, but also a greater risk at the same time. As traders hold their positions open for longer than other strategies, their long-term tactic grants them extended exposure to market volatility and as a result, can sometimes result in higher individual trade risk.
Nevertheless, even though the longer-term nature of this tactic can at times make trades riskier, it also has its benefits. For starters, price trends can become more obvious in a longer period of time. Furthermore, while the trader holds onto an asset for longer time periods, larger price movements can occur in the market, allowing the opportunity for higher profit to be generated.
Want to learn how? Then let’s get into the nitty-gritty of the long-term position strategy! First, when trading Contracts for Difference (CFD), you’ll need to do your research and pick a financial instrument. You should then decide whether you think it has the potential for growth or decline. To do this, you must consider the asset’s fundamentals in two levels:
- In terms of the asset’s company of origin - consider the firm’s revenue, earnings, debt, and cash flow.
- In terms of the general economy – consider the overall economy’s GDP growth, unemployment rate, and inflation rate.
If you decide your selected financial instrument will grow, you’ll need to buy a CFD within the right time frame. If you feel your asset’s price will decrease, prepare to sell your chosen CFD and go short.
When you have made your movement, you cannot totally ignore the short-term market fluctuations as it could indicate many changes to the long-term trend and could even cause to reach stop out levels. When you are going long (buying) and the asset’s value has increased so much that you can achieve the desired profit from its value, traders have discovered their exit point. Similarly, if you are going short (selling), when the asset’s value has decreased so much that you have achieved the desired profit from it, this is once again a short trader’s sign they have discovered their exit point.
To find the best time frame when trading CFDs, you’ll need to:
Scan the markets for a good opportunity to buy or sell your contract. Patience is a virtue, especially when opening and closing positions on CFDs. You need to wait for the best time frame to act.
Stay on top of it. Throughout the time frame you hold your contract for, you need to monitor its performance as the price could possibly move in the opposite direction of what you anticipated.
Reap the rewards when the right time frame comes. Patience, as everything can only take you so far – learn to let go of your asset when you have to.
Long-Term Position Trading Tactic: Advantages and Disadvantages
Long-Term Position Trading Tactic Advantages
Long-Term Position Trading Tactic Disadvantages
Less Stress for Traders: Unlike shorter term tactics, with the long-term position tactic, traders do not need to keep an eye on their trades constantly. This creates a calmer experience for traders.
Restrictive Opportunities: Traders who invest their time in this tactic will find themselves limited by the number of available opportunities, as there are fewer long-term trends than short-term fluctuations.
Greater Flexibility: Traders with packed schedules will appreciate the lack of time they need to invest in observing their trades with this tactic, as they can spend the same amount of time on other activities.
Locked Capital: When making use of this tactic, positions must be kept open for long periods, locking the trader’s capital.
Reduced Volatility: The long-term position tactic can help offset losses and reduce volatility, as a market trend becomes clearer when viewed from a larger scale.
Delayed Results: As positions are held for longer periods with this tactic, returns will not be received as quickly as they would be with other methods.
The Short-Term Position Trading strategy
The Short-Term Position Trading Strategy is the best tool for traders looking to make a quick profit.
The short-term position method is fairly simple: unlike long-term investing, short-term trading involves taking positions that can last for just a few seconds to several days, with the aim of making quick profits from market fluctuations. While it requires a certain level of knowledge and experience, short-term trading is certainly worth the effort.
By closely monitoring the markets and identifying key technical indicators, traders can take advantage of these fluctuations and make profits in a relatively short period of time. This nimble approach also allows traders to adapt quickly to changing market conditions and take advantage of emerging opportunities. This tactic can be risky, as traders are given less time to react to the market’s unpredictable nature, creating conditions for taking the wrong decisions. But if you put in the work, it can be a great way to turn a profit. Sounds good, doesn’t it?
So, where do you start? By learning about the market and assets you’re interested in. You must research the assets that have caught your eye and look at their trends to learn about their performance over a certain time frame. Doing this could also give you insight into how your chosen asset may react to certain events. Once again though, do know when to stop. If you’ve gathered enough information, you can begin to formulate the best strategy and get started.
You should also keep an eye on the market and market sentiment. If the market is bearish or ,bullish, be sure to adjust your short-term position strategy accordingly.
Finally, always use stop-loss orders. This will help protect you if a time comes when the asset moves in a direction that you weren’t expecting.
Short-Term Position Trading Tactic: Advantages and Disadvantages
Advantages of Short-Term Position Trading
Disadvantages of Short-Term Position Trading
Faster profits: When intraday trading, traders can receive profits on the same day.
Short Squeeze Risks: When a stock is heavily shorted starts to rise in price, it can trigger a short squeeze. This results in significant losses for short-term sellers who are caught in the upward price movement and are forced to close out their position by selling at higher prices.
Brief risk: As short-term position trading only lasts for brief periods, if you take a misstep, you can quickly correct it and use the capital to re-invest in more profitable assets.
Suitable Markets: Traders can only profit from the short-term tactic if they find a suitable market with high price movements and short-term trends. Applying this plan to markets that are more stable and less prone to sudden price swings like bonds will make it harder to produce profit.
Increased Market Liquidity: Opening and closing positions in the short term with this tactic can help increase market liquidity as more buyers and sellers trade in a shorter time frame.
Limited Analysis: Due to the shorter frames, traders are limited by the amount of analysis they can do when researching an asset they are interested in. This can result in misled evaluations of asset values and making misguided moves in the market.
Which Time Frame to choose?
When opening and closing positions with the multiple time frame strategy, the most important decision you’ll make is choosing the best time frames. It can be a tough call that can leave you feeling like you’re stuck between a rock and a hard place. No need to worry though, we’ll clear things up and help you pick the best time frames for you!
So, how long should the time frame you choose be? Well, there are several time frames you can choose from, but they are all used to track one of three main trends. Let’s break them down:
-
Primary trends are analyzed with larger time frames that last days or weeks.
-
Intermediate trends are analyzed with time frames that last 1 or 4 hours.
-
Short-term trends are analyzed with shorter time frames that last 1 minute or 15 minutes.
New traders think that shorter term strategies are best. However, this is not always the case. Let’s take the following hypothetical scenario that demonstrates this into account. Imagine a trader is interested in Asset B. When looking at the asset’s short-term performance, Asset B appears to be losing value. When looking at Asset B’s primary trend though, Asset B is actually increasing in value.
Time frame traders take part in swing trading, day trading, and position trading. Let’s see what these are!
Swing Trading
As we previously mentioned, swing trading is one way of using a time frame strategy where you need to hold a position for enough time to take advantage of market swings. Positions are typically held for a few days or weeks before they are closed, so patience is key. Swing traders also must be able to identify market trends and direction.
At its core, swing trading is essentially a way of opening and closing positions in the markets with a short to medium-term outlook. It is generally considered to be a form of trading where investments are bought and sold at a faster pace than they would be in a buy-and-hold scenario, where positions are held for time frames as long as years. Swing traders use technical analysis and charting to identify the best patterns and trends in price movements in the short-term. In turn, this valuable information can help them make quicker buying or selling decisions when trading. They also use trailing stops and other risk management techniques to protect profits and limit losses.
One of the advantages of this strategy is that it can be used in any market environment. Whether the markets are moving up or down, such traders can capitalize on the swings to make profits. It is also considered to be less risky than day trading as positions are held for longer time frames than day trading (swing trades can be held for weeks or months, whereas day trades are closed within the same day), reducing the number of trades taken and the amount of capital exposed to the markets.
The swing trading strategy is not for everyone. It takes a lot of patience and discipline to stay in a position for time frames that last several days or weeks. There is also a risk of missing out on potential profits if a position is held for too long a time frame, as the tactic is intended to be short to medium term. Additionally, swing traders must have a good understanding of technical analysis and charting to identify the best entry and exit points.
With the right risk management techniques and technical analysis skills, traders can capitalize on market swings to potentially make profits. While it is not for everyone, it can be the best strategy for those who are willing to put in the time and effort to learn the skills required to be successful.
Best Time Frame for Swing Trading
The time frame for swing trading can vary from short-term (1-4 days) to medium-term (1-4 weeks).
Short-term traders are looking for quick profits and will often use intraday charts to identify the best opportunities.
Medium-term traders may use daily charts to identify longer-term trends.
Swing Trading
Chart Timeframe
Daily
Research
Weekly
Time Needed
2 - 3 hours/week
Screen Time
30 - 60 mins/day
Holding Period
Days
Win Rate
~ 60-70%
Risk to Reward Ratio
0.5 - 1.5
Best suited for
Full-time job holders
Day Trading
When it comes to the day trading strategy, one of the biggest risks is that you may open a position at the very last minute before the market closes and it can’t be closed until the following day.
Therefore, it’s important to enter a trade with a feasible exit strategy in mind. You should also be prepared to cut your losses quickly if the outcome of your trade isn’t the best.
In addition to the risk of holding onto a losing position overnight, there are other risks associated with this time frame strategy. These include the costs associated with buying and selling assets, and the risks of opening and closing positions on the margin. All of these need to be considered when day trading.
The rewards of this time frame strategy can be significant if you’re successful. Traders who use this time frame strategy can potentially make large profits from just one trade. However, it’s important to remember that this time frame trading method is a high-risk activity, and it’s not suitable for everyone. Before getting started, it’s important to do your research and understand the risks and rewards associated with this time frame strategy.
Best Time Frame for Day Trading
Day trading is often done on a variety of time frames, ranging from intraday (4-6 hours) to ultra-short-term (scalping) time frames lasting only a few minutes.
Intraday traders aim to capitalize on short-term price movements and generally do not hold positions overnight.
Scalpers attempt to capture small profits from minor price movements in the markets. Traders who use this method often partake in technical analysis to identify short-term opportunities, and they may also use fundamental analysis to gain insight into the underlying strength of a security.
Day Trading
Chart Timeframe
Minutes
Research
Daily
Time Needed
4 - 6 hours/week
Screen Time
Hours
Holding Period
Minutes - hours
Win Rate
~ 50%
Risk to Reward Ratio
0.8 - 1
Best suited for
Full-time traders
Day trading can be a stressful and time-consuming activity, so be sure to understand the risks and markets that form part of your trade.
Position Trading
While day trading involves buying and selling securities within a single day, Position Trading is a longer-term strategy where traders hold onto investments for weeks, months, or even years. By combining this method with the multiple time frame trading strategy, position traders can analyze different time frames (like daily, weekly, or monthly charts) to evaluate the larger trend and make more informed trading decisions over a longer term.
Position trading is also the best time frame strategy for those who don’t want to be permanently glued to their screen, as it allows traders to take a more relaxed approach. Furthermore, this method is a good option for those who are relatively new to opening and closing positions, as it allows traders to gain experience without exposing themselves to too much risk.
Unlike other time frame strategies, as traders hold onto positions within larger time frames, position trading allows traders to take advantage of larger moves in the market. and benefit from the compounding effect of multiple price movements.
As the figure above shows, in this particular scenario, Position Trading requires less risk and time than Swing Trading. However, the reward is also less. For high rewards, traders must choose higher-risk tactics.
Position trading isn’t without its risks. Traders should best be aware of the potential for losses if the market moves against them. Additionally, traders should use appropriate risk management techniques such as stop-loss orders to help minimize losses.
Overall, position trading is the best time frame strategy for those who are looking for a lower risk, longer term approach. It allows traders to take advantage of larger moves and benefit from the compounding effect of multiple price movements.
Best Time Frame for Position Trading
Selecting the right time frames is crucial in position trading. When Position trades are held for several weeks, months, or even years, making long-term time frames is the ideal choice.
By studying weekly or monthly charts, traders can gain a comprehensive view of the market's overall trends. This long-term perspective effectively smooths out short-term price fluctuations, which could otherwise cloud judgment or lead to premature decisions.
Position Trading
Chart Timeframe
Daily
Research
Weekly
Time Needed
2 - 3 hours/week
Screen Time
30 - 60 mins/day
Holding Period
Weeks - months
Win Rate
~ 70%
Risk to Reward Ratio
1 - 5
Best suited for
Full-time job holders
By focusing on long-term time frames, traders can forfeit risks and see more stable and enduring market patterns. These provide a solid basis for decisions, making them a go-to tool in position trading's more patient, strategic approach.
Time Frame trading the markets
The most common markets for opening and closing positions with timeframes are stocks, forex, crypto and commodities.
Stocks: You can use the timeframe technique as part of your shares strategy to buy and sell shares. Investors may buy and sell stocks on the same day, or they may hold onto them for longer time frames. By doing this, investors can take advantage of price fluctuations and capitalize on market trends.
Forex: Time frame trading is a very popular forex strategy. In the forex market, investors can buy and sell currencies based on the current exchange rate. This allows forex investors to capitalize on short-term price movements, as well as speculate on future exchange rates.
Cryptocurrency: Cryptocurrency is another popular market for timeframes. Cryptocurrencies, such as Bitcoin, Ethereum, and Litecoin, have seen extreme price fluctuations in the past few years. By taking advantage of these short-term price movements, investors can capitalize on the volatility of the crypto market and maximize their profits.
Commodities: Finally, commodity markets are another market where timeframe trading can be used at all times. Commodity markets are markets where investors buy and sell commodities, such as gold and oil. Commodity markets can be volatile, so opening and closing positions with timeframes can be used to capitalize on short-term price movements.
Stocks
Timeframe trading is important for investors in the stock market because the market is much larger and more volatile than other markets. Day traders look to trade within minutes or hours, which requires different strategies than swing traders who may be interested in trading over days or weeks. Long-term investors may look to hold stocks for months or years, and this requires its own unique strategies.
Traders have to understand that different time frames need different tactics. To devise a different approach, they can think about how much risk they want to take and the resources that are available to them. But traders should be careful - the wrong time frame can be a big mistake.
Forex
The forex market is an excellent platform for trading with time frames. Open 24 hours a day, 5 days a week, the forex market gives traders the ability to try out different time frames that provide them with different market conditions. Volatility and liquidity increase in peak hours, allowing forex traders to use a shorter time frame. Slow trading hours on the other hand, are perfect for longer time frames, as forex traders can look for trends and identify potential entry and exit points.
There are so many factors that affect the forex market: economic news and political events throughout the world, from a new government policy to war. When interested in a certain forex currency, you need to know about the factors that influence its value so you can choose the right time frame. You can get help from technical analysis tools like chart patterns and technical indicators to identify the best possible entry and exit points.
There are so many ways you can trade with timeframes in the forex market. Customise your forex approach by considering major events, and you’ll no doubt find the time frame that suits your strategy and risk tolerance. With this in mind, you’ll be making informed and profitable forex trading decisions in no time.
Crypto
The crypto market is a whole other beast. This isn’t your traditional trading arena – yes, it has its high volatility, but (more importantly) it lacks centralized control. Crypto markets are open 24/7. Because of this, traders must monitor the market for any changes and act at the right time frame to get the right result.
As you can imagine though, this is easier said than done. The crypto market can change in the blink of an eye without any warning. Throw in the market’s lack of regulation into the mix, and you end up with an unpredictable market where it is hard to protect yourself.
You can still trade with time frames in the cryptocurrency market though. It’s just that you’ll have to bring 110% percent to the table with an approach that’s a tad more sophisticated than in other markets. Stay alert, react within the right time frame, use a strong risk management strategy, and you should be fine! You should also research the best coins available and understand the basics of the cryptocurrency market. Do this, and your chances of success when opening and closing positions with time frames in the crypto market will likely increase.
Commodities
Time frame trading in the commodity market is different from other markets. It’s important to remember that commodities are physical assets, meaning that their prices are more sensitive to supply and demand than in other markets. These larger price swings and increased volatility can make it more difficult to predict short-term price movements.
Speculation is another key factor that results in large price swings over a brief period of time. The more traders speculate, the more positions they open and close, resulting in a highly liquid commodity market, as news can make prices move quickly.
Another obstacle to accurately predicting trends, especially long-term ones? Politics and global events. Always keep these in mind as they have a very strong impact on the commodity market. Something as simple as a weather pattern can have a huge effect on a commodity’s supply and demand, driving its price up or down. There’s a slimmer chance that a major event will occur while opening or closing positions during a 1- or 5-minute time frame. When it comes to longer term periods however, all this changes drastically.
Accurately predicting a market’s direction is never easy, and the wide variety of commodities and different types of contracts available – the very nature of the market – makes it even harder.
Overall, time frame trading in the commodity market is different from other markets due to the variety of factors affecting the market.
Summing up
So – what does this all mean exactly? Well, to sum it all up, picking a time frame for trading is super important. It plays a major role in the three big types of trading: swing trading, day trading and position trading. Picking the right time frame helps traders find the best moments to trade and make smarter decisions. Using these strategies can help you ride the wave of unpredictable markets, increase your chances to gain more profits and reduce your risks when trading.
That said, how well these time frames work can really depend on what you're trading. For example, forex behaves differently and has other risks compared to trading stocks or commodities. As traders, we must be aware of these. Swing trading, which analyses short to medium-term stock changes, is a bit easier for newbies. Day trading, however, requires skills in making quick profits from trades within the same day. Finally. position trading needs a long-term view and a strong strategy to manage risk.
Thanks to technological advancements, traders can now work with several time frames at the same time, which gives a wider understanding of market trends and makes it less daunting to choose the most suitable time frames. Instead of sweating about picking the 'right' time frame, it's all about understanding how to use a mix of time frames to get the results you want. Whether it's stocks, forex, crypto, or commodities, you should make sure you understand each market's quirks and adapt your strategies accordingly.
Each type of trading comes with its own perks and challenges. Swing trading might be less risky than day trading, but it sure needs a good dose of patience and self-control. Day trading can offer big rewards, but it's high risk. Position trading, though less risky, requires you to be in it for the long haul and have a deep understanding of market trends for extended periods.
While it's true that time frame strategies can help you up your potential profits and minimize trading risks, remember that nothing's guaranteed. Doing your homework, always learning, and being open to change are key to becoming a successful trader in any market.
In the end, succeeding with the time frame strategy really depends on your understanding of the market, your style of trading, how much risk you can take, and your ability to skillfully apply technical analysis and risk management techniques. So, whether you choose to dive into swing trading, day trading or position trading, mastering your understanding and use of time frame strategies is crucial to chasing your trading goals.
Always remember to use the right frame that suits your plan.
With the right frame and strategy and a little bit of luck, you too can become a successful time frame trader. Good luck out there!
Want to find out what time frame trading is? Should you trade with or without time frames? Which is the best way of using time frames in your trading strategy?
If you’re reading this, these are all questions you have probably asked yourself at one point or another! These questions can be overwhelming, but you shouldn’t worry – you’re in good hands!
We’ll teach you everything you need to know about using time frames. Soon, the process will be so simple, you’ll be trading like a champion in no time!
FAQs
The best time frame for swing trading is usually between one to several days and sometimes up to a few weeks. Swing traders use technical analysis and chart patterns to find trades with a higher probability of success. Swing traders also often use the 4-hour and daily time frames to identify the best potential trading opportunities.
The first two to three hours after a market opens are generally considered to be the best time frames for this strategy. This time is when volume is usually the highest, creating price fluctuations and so many opportunities for traders!
This strategy’s sweet spot is usually anywhere between 15 minutes and 1 hour, giving traders the right amount of time they need to spot short-term price moves and capitalise on any small changes in the market. The best time frame for your particular strategy and risk tolerance might be another, so be sure to pick the one that suits you the best.
