When I consult with forex traders I always get this burning question: What is the best time frame I should trade?
My answer varies per trader because when I assess them as a trader becuase I assess their lifestyle. Their lifestyle will have to permit them to trade in my opinion what the best time frame to trade is.
I'm pretty sure you are ready for me to give you the answer, huh? Well.......ok...but this answer is going to require you to have some patience. If you don't have patience, you won't like my answer ,but I can promise you it will change your perspective on trading. As a matter of fact I have 2 answers. Let's get the big one out of the way.
The ultimate best timeframe to trade from is the daily time frame. I am pretty sure you have heard this answer before and the reason why. Let me reiterate what you've probably heard:
The daily time frame is best to trade from because it allows you to have less time on the charts and the news does not effect the market movement as much and you can catch big moves. Yes!!!!! I agree with these reasons.
I'll give you reason, if you follow the trend of the market, its hard for you to be wrong. Now, I am not saying you won't take losses, but you won't take as many. In my opinion, when trading with the trend and from the daily time frame, it's hard to be wrong on 1 currency pair more often than not.
If you need help with trend watch this video here: http://www.youtube.com/watch?v=8x8KET0StDY
Now I know some people will make the statement that trading the daily has too much risk. That is not necessarily true. Picture this, I can enter into 1 trade from the daily. A day trader can enter into 3-10 trades that same day before I enter my trade. Their risk can equal mine. The only difference is, I enter into 1 trade and they entered into many. I can be wrong once while they can be wrong multiple of times. This is another topic for another blog post. Hopefully you can see why the daily is one of the best time frames to enter from.
So, here is my second answer to what is the best time frame to trade from. Can you guess what it is? Maybe, maybe not. Well, its the 4 hour time frame.
Yes. The 4 hour timeframe. There is an are to trading this time frame. I like using this time frame for compound entries. Remember when I referred to trading with the trend. Well, think about it like this, if I am trading with the trend and entering on the daily time frame, why not compound on a lower time frame and catch the swing? This is where the 4 hour comes into play.
Here is an example of how to use the 4 hour time frame: http://www.youtube.com/watch?v=uQffttRYWuI
Why these two time frames work magically together? Well, let's take it back to this...
1. Less time on the charts
2. Slower to react
3. News does not play as much of a major role on my decisions
4. Less losses if traded correctly.
5. Scaled out perspective