Finding Your Suitable Trading Style Based on Chart Timeframes

FX markets are open 24 hours a day, except on weekends, allowing you to trade at any time.

However, constantly monitoring charts may lead to trading even when you have limited time, increasing the risk of losses.

Additionally, the availability of trading at any time can lead to confusion about finding a time frame that suits you.

Therefore, in this article, I will share my thoughts on how to discover a trading style that suits you based on the characteristics of chart timeframes.

Understanding Your Living Environment

While you can trade FX 24 hours a day on weekdays, it’s important to note that the trade at any time doesn’t equate to win at any time.

Therefore, it’s crucial to thoroughly understand your living environment and find a trading style that suits you based on your own timeframe.

To achieve this, let’s start by reevaluating:

– What times of the day can you allocate to FX trading?
– When can you actively monitor the charts?

Once you’ve gained a clear understanding of the time you can dedicate to FX, you can then formulate a trading strategy that aligns with these timeframes.

Who is suited for short-term trading?

In this context, short-term trading refers to day trading primarily focused on 5 to 15-minute candlestick charts.

When trading on these timeframes, it’s desirable to have approximately 3 to 4 hours available for chart monitoring each day.

Particularly, if you can allocate time between European time and New York time when trends and volatility are more likely to occur, you may find relatively more trading opportunities.

Furthermore, when focusing on timeframes of 5 to 15 minutes, trades typically reach their conclusion:

– Within approximately 30 minutes at the earliest
– Usually within 1 to 3 hours

Taking into account the monitoring time until the exchange rate reaches the entry point, it’s still ideal to have about 3 to 4 hours available for chart analysis each day.

Additionally, on these timeframes:

– Stop loss range is typically around -10 to -20 pips
– Take profit range is typically around +20 to +50 pips

These represent average loss and profit margins, making short-term day trading a suitable choice for those who cannot tolerate large stop loss margins.

Who is suited for long-term trading?

In this context, long-term trading refers to a trading style primarily focused on timeframes of 1 hour or longer.

When trading on these timeframes, dedicating about 10 minutes a day to Forex and chart monitoring should be sufficient.

With a trading timeframe of 1 hour or more, price movements tend to be slower, which means it can take some time for the exchange rate to reach the entry point.

For instance, in the chart image below, if you were to enter at the yellow circle, the time it takes from the cyan circle to the yellow circle is approximately 16 hours.

Therefore, checking the charts 1 to 3 times a day should be sufficient when trading on timeframes of 1 hour or longer.

Furthermore, on timeframes of 1 hour or more, horizontal support and resistance levels tend to have a significant impact.

Trading with limit orders placed near these levels for both entry and exit can lead to overall profitable results.

In fact, when I had limited time to monitor charts due to work, I primarily focused on trading on the 4-hour timeframes.

During work hours, I would place all limit orders.

Furthermore, in long-term trading with timeframes of 1 hour or more:

– Stop loss range typically falls around -30 to -40 pips
– Take profit range typically falls around +50 to +200 pips

Although the stop loss margin may be slightly larger and the number of trading decrease, the potential for overall profits don’t change much compare to short-term day trading.

Therefore, individuals suited for longer timeframes in trading are those who have:

– Less than 1 hour available for FX trading
– A preference not to spend extended periods monitoring charts.

What if your trading time and style don’t match?

For example, there are situations where you only have “a limited amount of time,” such as 1 to 2 hours per day, to allocate to FX trading.

Additionally your trading style is short-term day trading.

In cases like these, it’s essential not to force trades.

The reason for this is that when you have limited time available for FX trading and you attempt short-term day trading, you are more likely to force entry points, leading to entries in unfavorable positions.

Engaging in this behavior not only compromises your trading style but also tends to develop bad habits.

Furthermore, when you incur losses, there is a higher likelihood of trying to quickly recover those losses, leading to issues like:

– Overtrading
– Difficulty in executing stop-loss orders

In essence, when you’re in a situation where you have “no time available for FX trading,” it implies that it’s not the right time to trade.

In such cases, it’s advisable to refrain from trading and focus on analysis and verification instead.

Related Post: Effective Validation Methods for Profitable FX Strategies

Scalping is strictly prohibited.

Having only 1 to 2 hours available for FX trading is not a reason to choose a 1-minute scalping timeframe, and it is highly advisable not to engage in scalping.

The reason is that scalping is easily influenced by the rapid price movements on the 1-minute timeframe, making it one of the most challenging trading styles within the FX.

Ordinarily, you might think, “I can easily grab 2-3 pips,” or “So, scalping is ideal when I have limited time.” However, the reality is quite the opposite.

In fact, you’re more likely to become entrapped by price movements, unable to execute stop-loss orders, and succumb to overtrading tendencies, quickly depleting your funds.

Therefore, it’s highly advisable to avoid scalping until you’ve achieved stable trading performance that surpasses day trading.

In fact, I myself incurred losses of over $100,000 due to getting involved in scalping.

Related Post: How I Lost $100,000 in FX Due to the 1-Minute Chart!

Time for validation is necessary except for trading.

Up to this point, I’ve discussed choosing the right timeframe for your trading style.

However, it’s crucial to emphasize that apart from the time spent on actual trading, you must allocate time for analysis and validation.

In fact, without thorough validation, focusing solely on trading is likely to make it challenging to succeed in FX.

Therefore, if you’re not achieving success in FX trading, dedicating time to validation rather than real trading is likely to yield quicker results in the short term.

In my case from the past, after returning from work, I used to quickly check the charts, set alerts for entry points, and then engage in validation until the alerts went off.

If the alerts didn’t trigger by the time I needed to sleep, I would give up trading for the day and go to bed.

By adopting this approach, I was able to conduct validation even when I couldn’t actively trade.
Gradually, I made progress, and around 3 months later, I had developed a stable trading strategy.

For your information, the average time I spent on validation during that period was about 30 minutes to 1 hour per day.

If you want to know more about the validation methods, please read the following article.
Effective Validation Methods for Profitable FX Strategies

8 Key Verification Items in FX for Success

Summary

Many people struggle with not knowing their suitable trading style, but in such situations, it’s advisable to determine the timeframe for trading based on your lifestyle and personality.

However, in addition to the time spent on actual trading, time for validation is necessary.

If you cannot allocate time for chart analysis, it’s better to focus on validation rather than forcing trades.