HomeEducationForex Technical AnalysisA Guide To Forex Multiple Time Frame Analysis

A Guide To Forex Multiple Time Frame Analysis

Time frame analysis is ultimately where a trader looks at a variety of multiple timestamps in analysing the market they have chosen to trade. The reason why this is highly important for traders to do is important for numerous reasons. Firstly before entering a trade it is important for a trader to understand how the markets are moving relative to time.

A trader starting off analysing a daily chart may see signals that show a possibility for a buy, however, in the very short term, the markets may be heading downwards. By analysing each time frame the trader will be better guided in deciding at what price to enter the trade. 

Secondly, in knowing the price in which to enter, a trader will then be able to avoid the stresses of “bad timing”. Most traders who may find the perfect opportunity may often see the markets go against them, even if their strategy showed them the potential for the markets to go in their favour.

As a result, they may panic and decide to close the trade as they believe they may have been wrong in entering the market. However it may be that they were correct, it was just a case of it not being their time to be correct, and they would need to bide their time instead of panicking and making a bad decision.

Examples of Multiple Time Frame Analysis

Traders may look at the below D1 (1 day) chart and can see the following. Yes, the markets have been clearly falling, however, they continue to? Is this a good time to continue to sell?

D1 Chart – CADCHF

The above chart shows that the markets have hit the floor or support point, at this point, there are 2 outcomes, it could bounce back up or break out of the floor. To get a better idea you may want to see the momentum in the short term time frame. Within the short term time frame (1 minute) it appears as though the markets are coming back up, so those who expected a breakout may reconsider, and those who want to buy, have some more evidence on why they should do this.

M1 Chart – CADCHF

Time frames in trading 

Time frames in trading vary from short term, middle term and long term trading and investing. Depending on the type of trader or investor you are, you will likely have a preferred time frame you use in analysing charts to find potential opportunities.

Most trading platforms give traders the chance to choose the time frames which best fit their needs. Here are some of the main time frames normally shown. 

M1 – 1 Minute

M5 – 5 Minutes

M15 – 15 Minutes

M30 – 30 Minutes

H1 – 1 Hour

H4 – 4 Hours

D1 – 1 Day

W1 – 1 week

MN – 1 Month

Below we look at the various time frames which can be used by traders and the strategies associated with them. 

Best time frames for short-term traders

Shorter-term time frames are usually those which are no greater than 30 minutes. These are normally for scalpers and traders who target very quick and small incremental gains. Short term traders will also likely be news traders who look at capitalising on the volatility surrounding news releases. 

Those of you who identify with the above will likely be using the following charts.

M1 – 1 Minute

M5 – 5 Minutes

M15 – 15 Minutes

M30 – 30 Minutes

In using these frames it should be considered that although the charts move with speed, it’s harder to analyse are predict the direction in which the markets may be taking. Aside from the here are some more Pros and Cons for Short term traders

Pros

  • Rapid movement
  • There is more volatility
  • Your trade theories get proven or invalidated in a shorter span of time

Cons

  • Harder to analyse potential moves
  • Price moves will generate smaller profits than longer time frames
  • Greater levels of stress

Best time frames for mid-term Traders

Midterm time frames are usually used by day traders and those who want to be more proactive in finding opportunities. Unless you are a scalper or have a trading robot you follow, it is harder to proactively find trading entries via the shorter time frames. Midterm traders usually forecast upcoming events like Non-Farm Payrolls and have a stronger point of views on where they believe the markets are heading, and are willing to wait to be proven right. 

Those of you who identify with the above will likely be using the following charts.

H1 – 1 Hour

H4 – 4 Hours

D1 – 1 Day

Besides the 1-hour time frame which can be considered as a “short/midterm”  the remaining stamps usually provide a greater view of how the market has been moving in the last few months. This allows a trader to have a better idea of the true direction the markets are attempting to take. This aside, below are more Pros and Cons. 

Pros

  • Bigger Picture View
  • More proactive trade analysis
  • Higher levels of gains if trades are correct

Cons

  • Takes longer for moves to take place
  • Trading these time frames can be boring, as more patience is required

Best time frames for long-term traders

Long term time frames are usually for higher net worth traders and investors who are invested in the bigger picture. These traders usually will be those who will be able to ride the markets not only going against them but have the margin required to let these move against them for a considerable amount of time. These traders will be extremely opinionated and believe that when the markets begin to head in the way they hope, they will be able to be greatly rewarded financially. An example of such traders could be seen in the film “The Big Short”. 

Those of you who identify with the above will likely be using the following charts.

W1 – 1 week

M1 -1 Month

 Earning potential in this time frame is greater than any other. However, it takes very large pockets to trade in these time frames. See the Pros and Cons below.

Pros

  • Potential for the largest level of profits
  • Less time input need
  • Birdseye view of historical movements

Cons

  • Higher costs 
  • Longer trade duration’s
  • An incredible amount of patience required

Best Brokers for Time Frame Analysis

The best brokers for multiple time frames are usually those who allow scalping, have a range of markets, good execution speeds and generally reliable. Trading volatile markets can be risky and expensive, so brokers would need to offer the above and more, to help ease your mind when trading with them at the best cost.

Here is our list of the best brokers for Time Frame analysis:

1
Min. Deposit
$10
Promotion
User Score
10
Leverage
30:1
New accounts
Spreads
1
PIPs
Regulations
CySEC, FCA
Forex Pairs
No Fee
Start Trading
Pros:
Join the Social Trading revolution. Connect with other traders, discuss trading strategies, and use our patented CopyTrader
eToro is the world’s leading social trading platform, offering a wide array of tools to invest in the capital markets
Largest number of currency pairs to trade
Payment Methods
Bank Transfer, Credit Card, Debit Card, PayPal, Wire Transfer
Full regulations list:
CySEC, FCA
Cryptoassets are highly volatile unregulated investment products. No EU investor protection. eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro. Your capital is at risk.
2
Min. Deposit
$10
Promotion
User Score
9.3
Leverage
500:1
New accounts
Spreads
0.8
PIPs
Regulations
Forex Pairs
55+
No Fee
Start Trading
Pros:
55+ currency pairs available
Trade on a trusted platform
24/7 support via live chats, email or phone call
Payment Methods
Bitcoin, Credit Card, Debit Card, Visa
Full regulations list:
LonghornFX offers high-leverage trading on a wide variety of assets. Trading with leverage carries a degree of risk which may result in losing more than your investments. Clients should practise risk management to protect themselves from losing more than they can afford when trading with leverage.
3
Min. Deposit
$10
Promotion
User Score
8.7
Leverage
500:1
New accounts
Spreads
0.7
PIPs
Regulations
Forex Pairs
55+
No Fee
Start Trading
Pros:
Can fund with BTC
64 global companies including Netflix and Amazon
Free deposits and withdrawals
Payment Methods
Bitcoin, Credit Card, Debit Card, Wire Transfer
Full regulations list:
EagleFX offers leveraged trading on a range of assets within its platform. CFD and Spot Forex trading do carry a degree of risk which may result in you losing more than your initial investment. Please ensure you fully understand the risks involved with leveraged trading and ensure this is not detrimental to your personal or institution's financial well being.

 

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