How Do I Choose a Time Frame to Trade Currency?

When I first began trading currency on the forex market, I had no idea which time frame to watch. It always seemed to give conflicting technical signals. On one chart it appeared as if the currency was going up and on another chart it appeared as if it were going down. I was very confused and it took a lot of trial and error before I realized which charts were relevant.

First of all I want to say that the biggest difference is the amount of money that you have in your currency trading account. If you have enough money in your account to buffer your trade that goes in the wrong direction like Warren Buffett than you can trade the Monthly time charts, but for most of us, it is better to trade the 4 hour or less time frame charts.

Personally, I check every time frame before making a market trade. It is best to have as much information as you possibly can when you are trading forex.

Generally speaking most traders agree that the four hour chart will show you the general direction of the currency pair, but it is also critical for you to check the daily chart because you never want to place a trade against the daily chart trend.

At a minimum, you should check the daily, 4 hour, 1 hour, and 15 minute chart before making a trade.

Some people feel that it is a personal choice. I have know people to trade the tick chart (crazy) and others that only trade the monthly chart.

Before I place a trade, I check all of the fundamentals and the economic calendar, then all of the technical charts and forecasts. When everything is pointing in the same direction of the trend that I can see, then I place a trade. If there is conflicting information, I keep studying until I am comfortable with my decision.

Remember, the currency market can change in one second and go against all of the fundamentals and technical forecasts. It is highly risky and you should only invest money that you can afford to lose.

Imagine Indiana Jones holding his whip up in the air. If he brings in down and you were able to watch it in slow motion this is what you would see: where his hand is holding onto the whip there would be a clear indication that the whip is going down (like the monthy chart) but it is happening very slowly, a couple feet down the whip is going up and down in a gentle rolling motion (like the daily chart) but is still moving too slow, a couple feet down the whip is moving faster up and down and at the tip of the whip (tick chart) it is whip sawing all over the place.

The whip is the best analogy that I can think of for the forex market. You will drive yourself crazy with the fluctuation of the lower time frames, but on the other hand you will need enough money to leverage if you want to trade the longer time frames.