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Choosing Your Timeframe
Choosing Your Timeframe - text
When choosing your trading timeframe, you need to bear in mind a number of factors, namely, your style of trading, your time commitments, the nature of the market your are trading, and the amount of money in your trading account.
Some people prefer short term trading in which they enter and exit the market very quickly. This suits some traders, who seek profits from market moves which can occur in a matter of hours. Over the course of a short period of time e.g. few days, a market may experience significant upward and downward moves, providing you significant profit making opportunity.
Short term trading by its nature requires a lot of monitoring and regular assessment of the trading environment.
As certain markets exhibit such volatility in a short period of time, leaving a trade unmonitored can be risky. Your position may be onside in one moment only to suddenly move offside.
For those of you engaged in other forms of employment, you may not be able to sit at your trading screen and trade hourly, and won’t be able to watch the markets constantly.
If that is the case, you may be better suited to medium and long term trading, which generally do not require you to monitor trades constantly like short term trades.
A notable drawback is that you will miss out on profit making opportunities which occurs intra-day.
The trading time frame you adopt may also come down to the size of your trading account.
You need to ask yourself if you have the margin required to hold a trade for a longer period of time.
Markets may exhibit a trend in a certain direction in the long term, however the market may experience fairly significant reversals in the shorter term. In such instances, you may see your position move significantly into an offside position.
If you are using stop loss orders when trading, a market which temporarily trades offside may hit your stop and exit your trade, only for the trend to continue in the direction you anticipate into what would have been an onside position.
You should also bear in mind that there is no set rule that you need to stick to one timeframe when trading.
For example, you can have a short term, a medium, term and a long term trade all running at the same time and all in the same market.