Chart Timeframes: Using Time to Customize Your Strategy
How to Use Different Chart Timeframes
When using charts to make trading decisions, you can choose between different spans of time when it comes to your chart.
Charting systems can offer timeframes ranging from tick by a stick to monthly bars. Monitoring multiple timeframes can give you a greater perspective on the personality of a currency pair.
They are also good for swing traders looking for an opportune moment to make an entry.
The 1hr chart is for swing traders and long term traders looking for the momentary trend. The 1hr chart is well known for its reliability on short-term changes in momentum.
The 4hr chart is for long term traders. The 4hr chart is most useful for traders wishing to trade the daily chart that wants to make a carefully timed entry. The 4hr chart has earned the moniker over the years as 'The Banker's Chart.' This is because each 4hr candle of they day contributes to either an AM or PM session of Asia, London, or North America.
The daily chart is best used for setting up long term positions on a currency pair.Some of the most impressive chats you find are on a Daily chart. What surprises many traders over the years is how clean the daily trends can become. However, if you decide this kind of trading is for you, it's likely best to have a much smaller trade size on that you would if you were trading an hourly or intra-hour chart.
Each of the different time frames can give you clues to the personality of a trading pair. You can find out whether the pair tends to move steadily during it™s trends, or if it tends to stall often. You can find out if it™s volatile during daily sessions, but steady over the week. You may also find that one currency long-term trend can provide you trade set-ups on many crosses involving that currency.
Viewing a currency pair in multiple timeframes can help you find good entry and exit points, depending on the strategy that you want to use. Day trading a currency can make a lot of sense for traders looking to take maximum advantage of daily volatility, but keeping the daily trend in mind can help day traders focus on the bigger picture.
The Bottom Line
Forex trading attracts many different types of traders with many different types of systems. If you want to trade a currency pair, it™s best to become as familiar with it as possible. Viewing the currency pair in multiple timeframes is part of the process of learning its personality. Understanding the currency pair's personality can help you in your success with trading it.