Time Frames in Forex
Utilizing different forex time frames can assist traders to spot the larger trends and more granular price action that may be unfolding. Different viewpoints can be formed when switching between different time frames on the same currency pair and this can either benefit or hinder the analysis. Therefore, it is crucial to have a solid understanding of forex trading time frames from the very first trade.
Forex trading time frames are commonly classified as long-term, medium-term, and short-term. Traders have the option of incorporating all three, or simply using one longer and one shorter time frame when analyzing potential trades. While the longer time frames are beneficial for identifying a trade setup, the shorter time frames are useful for timing entries.
Multiple Time Frame
Multiple time frame analysis is simply the process of looking at the same pair and the same price but on different time frames. Remember, a pair exists on several time frames – the daily, the hourly, the 15-minute, heck, even the 1-minute! When you use a chart, you’ll notice that there are different time frames being provided.
Different Chart Time Frames
The current chart above is the “1 day” or daily time frame. When you click on the “1 hour”, it will bring out the 1-hour chart. If you click on “5 minutes”, it will bring out the 5-minute chart and so on.
There is a reason why chart apps offer so many time frames. It’s because there are different market participants in the market. This means that different forex traders can have different opinions on how a pair is trading and both can be completely correct.
Some will be traders who will focus on 10-minute charts while others will focus on the weekly charts. Trade 1 minute see that EUR/USD is on a downtrend on the 4-hour chart. However, Trader 2 trades on the 5-minute chart and sees that the pair just ranging up and down. And they could both be correct! As you can see, this poses a problem. Trades sometimes get confused when they look at the 4-hour, see that a sell signal, then they hop on the 1-hour and see the price slowly moving up.