What is the Best Time Frame to Trade Forex?

Traders utilize varying time frames to speculate in the forex market. The two most common are long- and short-term-time frames which transmit through to trend and trigger charts. Trend charts refer to longer-term time frame charts that assist traders in recognizing the trend, whilst trigger charts pick out possible trade entry points. This article will explore these forex trading time frames in depth, whilst offering tips on which can best serve your trading goals.

How to decide the best time frame to trade forex

As mentioned above, the best time frame to trade forex will vary depending on the trading strategy you employ to meet your specific goals. The table below summarizes variable forex time frames used by different traders for trend identification and trade entries, which are explored in more depth below:

Main forex trading time frames

Traders utilize different strategies which will determine the time frame used. For example, a day trader will hold trades for a significantly shorter period than that of a swing trader. Read our guide for a basic introduction to different trading styles.

Position trading time frames

The position trading time frame varies for different trading strategies as summarized in the table above. This could fluctuate from daily to yearly under the ‘long-term’ definition.

Many new traders tend to avoid this approach because it means long periods of time before trades are realized. However, by many accounts, trading with a shorter-term (day trading) approach can be far more problematic to execute successfully, and it often takes traders considerably longer to develop their strategy.

Position trading (longer-term) approaches can look at the monthly chart for grading trends and the weekly chart for potential entry points.

Position trading example

After the trend has been determined on the monthly chart (lower highs and lower lows), traders can look to enter positions on the weekly chart in a variety of ways. Many traders look to utilize price action (as seen in the weekly chart below) for determining trends and/or entering positions, but indicators can be utilized here as well.

Monthly AUD/JPY trend chart:

Weekly AUD/JPY trigger chart:

Swing trading time frames

After a trader has gained comfort on the longer-term chart, they can then look to move slightly shorter in their approach and desired holding times. This can introduce more variability into the traders approach, so risk and money management should be addressed before moving down to shorter time frames.

Swing trading is a happy medium between a long-term trading time frame and a short-term, scalping approach. One of the best benefits of swing trading is that traders can get the benefits of both styles without necessarily taking on all the downsides. As a result, this makes swing trading a very popular approach to the markets.

Swing traders will check the charts a couple times per day in case any big moves occur in the marketplace. This affords traders the benefit of not having to watch markets continuously while theyre trading. Once an opportunity is identified, traders place the trade with a stop attached and monitor at a later stage to see the progress of the trade.

Another advantage of this approach is that the trader is still looking at charts often enough to seize opportunities as they exist. This eliminates one of the downsides of longer-term trading in which entries are generally placed on the weekly/daily charts.

Swing trading example

For this approach, the daily chart is often used for determining trends or general market direction and the four-hour chart is used for entering trades and placing positions (see below). The daily chart shows the recent swings, high and low respectively. Traders usually trade swings back in the direction of the preceding trend – in this example, the preceding trend is upwards.

Now that the trade direction has been identified, the swing trader will then diminish the time frame to four hours to look for entry points. In the example below, there is a clear price resistance level that the swing trader will look at when entering a long trade. Once the price breaks or the candle closes above the designated resistance level, traders can look to enter.

Daily USD/ZAR trend chart:

4-hour USD/ZAR trigger chart:

Day trading time frames

Day trading can be one of the most difficult strategies for finding profitability. Newer traders implementing a day trading strategy are exposing themselves to more frequent trading decisions that may not have been practiced for very long. This combination of experience and frequency opens the door for losses that might have been prevented had the trader opted for a slightly longer approach like swing trading.

The scalper or day trader is in the unenviable position of needing the price to move quickly in the direction of the trade. Therefore, the day trader becomes tied to the charts as they seek the markets trends for that day. Obsessing charts for long periods of time can lead to fatigue. The shorter-term approach also affords a smaller margin of error.

Generally, there is less profit potential in short-term trading, which leads to tighter stop levels. These tighter stops mean a higher probability of failed trades as opposed to longer-term trading. To trade with a very short-term approach, its advisable for a trader to get comfortable with a longer-term, and swing-trading approach before moving down to the very short time frames.

Resembling longer-term trading, day traders can look to evaluate trends on the hourly chart and locate entry opportunities on the ‘minute’ time frames such as five or ten-minute charts. The one-minute timeframe is also an option, but extreme caution should be used as the variability on the one-minute chart can be very random and difficult to work with. Once again, traders can use a variety of triggers to initiate positions once the trend has been determined - price action or technical indicators.

Day trading example

The charts below use the hourly chart to determine the trend – price below the 200-day moving average indicating a downtrend. The second 10-minute chart uses the RSI indicator to assist in short-term entry points. In this case, the trader only identifies overbought signals on the RSI (highlighted in red) because of the longer-term preceding downtrend.

Hourly EUR/USD trend chart:

10-minute EUR/USD trigger chart:

The best time frame to trade forex does not necessarily mean one specific time frame. It is possible to combine approaches to find opportunities in the forex market.

Multiple time frame analysis follows a top-down approach when trading and allows traders to gauge the longer-term trend while spotting ideal entries on a smaller time frame chart. After deciding on the appropriate time frames to analyze, traders can then conduct technical analysis using multiple time frames to confirm or reject their trading bias.

What is multiple time frame analysis？

Multiple time frame analysis, or multi-time frame analysis, is the process of viewing the same currency pair under different time frames. Usually, the larger timeframe is used to establish a longer-term trend, while a shorter timeframe is used to spot ideal entries on the market.

The rule of thumb is to use a ratio of 1:4 or 1:6 when switching between time frames. The logic behind this approach is to be able to uncover the smaller, intricate movements in price for well-timed entries into the market. That being said, it is of little use to focus on extremely small time frames because most of the price movement has little bearing on the overall trade and can lead to unnecessary stress when the market seems to be moving quickly.

Considering an example, when viewing the trend on an hourly chart, traders can zoom into the 10-minute chart (1:6) or the 15-minute chart (1:4) for suitable entries. The 10 or 15-minute chart provides an indication of shorter-term developments and the hourly chart is where the trades progress can be monitored going forward.

How to identify the best forex time frame？

Many traders, new and experienced, want to know how to identify the best time frame to trade forex. In general, traders should select a timeframe in accordance with:

the amount of time available to trade per day

the most commonly used time frame utilized to identify trade setups

For example, individuals who scan the forex market using daily charts, while only being able to dedicate one hour a day in front of the charts, are better off using the daily time frame for analysis and a four-hour chart for the entry trigger. Those with more time dedicated to the market can make use of much smaller time frames as they are able to analyze the market and act quickly when opportunities arise.

Table: General time frames of different traders

Multiple time frame analysis techniques for day traders

Day traders typically have the whole day to monitor charts and therefore, can trade with really small time frames. These range anywhere from a one-minute to the 15-minute, to the one-hour time frame. Day traders that identify their trade setups in the one-hour time frame can then zoom into the 15-minute time frame to spot ideal market entries.

Trend time frame: One-hour chart

Entry time frame: 15-minute chart

Day traders can look at the one-hour chart to establish the trend. Price trades predominantly above the 200 MA and is moving upwards, hence the long trading bias. Day traders can then zoom into the 15-minute chart to spot ideal entries. Day traders can then zoom into the four-hour chart to spot ideal entries.

EUR/GBP one-hour chart exhibiting an upward bias

The 15-minute chart allows day traders to get a closer look at how prices is evolving in the lower time frame. The uptrend is also apparent on the 15-minute chart which confirms the upward bias. The two black arrows point towards the contracting Bollinger band, which often precedes an increase in volatility. Traders can enter a long position once the price penetrates the upper band and use either the 20-day MA or lower band as a dynamic stop.

EUR/GBP 15-minute chart showing ideal entry into the market

Multiple time frame analysis techniques for swing traders

Swing traders tend to have significantly less time to spend monitoring charts when compared to day traders – perhaps one hour or less. Thus, swing traders will look to the daily chart for the overall trend and then zoom in to the four-hour chart to spot entries.

Trend time frame: Daily chart

Entry time frame: Four-Hour chart

The daily time frame on EUR/GBP allows traders to spot the downtrend, but where is the ideal entry into the market？ Zooming into the four-hour timeframe sheds more light on this.

EUR/GBP Daily chart exhibiting a downward trend

Zooming into the four-hour chart, traders can look for short signals. Note the upper and lower channel lines are now faint dotted lines to keep the chart clean. After a failed breakout, price drops back within the trading range. A failed move higher creates further conviction for the short trade.

Price is trading below the 200-day SMA and once back within the range there is a bearish crossover as the 20 MA (green line) crosses below the 50 MA (Blue line), providing the entry trigger.

EUR/GBP Four-hour chart filtering trades in favor of short positions