Combining Short-Term And Long-Term Time Frames
- There are at least 5 different time-frames to trade FX
- Time frames boil down information in a more concentrated manner
- Time frames dictate how long you’ll be trading a single pair
Forex Time Frames – How Many Are There?
Forex and CFD charts offer the ability to choose different time frames. Traders can analyze short-term and long-term time frames. Here is what most traders consider short-term time frame and long-term time frame:
|Short-term time frame|
(Forex time frames in minutes)
|Long-term time frame|
(Forex time frames more than minutes)
|1 minute (shortest)||4 hour (least longest)|
|30 minutes||Monthly (longest)|
|60 minutes (least shortest)|
The 1 minute time frame is considered to be the shortest time frame on the MetaTrader 4 (MT4) and MetaTrader 5 (MT5) platforms. Why?
Because the time frame indicates the length of each candlestick or bar. The shorter the Forex time chart, the less time it takes for a new candlestick to appear. In the case of the 1 minute chart, it only takes a minute. The 5 minute chart is 5 times as slow because it takes 5 minutes before a candlestick or bar appears.
The short-term time frames include the 1 minute, 5 minute, 15 minute, 30 minute, and 60 minute charts.
The long-term time frames include the 4 hour, daily, weekly, and monthly charts.
Traders sometimes also refer to time frames in terms of Forex time zones. The main Forex time zones are considered to be Tokyo, London, and New York.
How To Combine Short-Term And Long-Term Time Frames
Forex traders have the option of using any Forex time chart they want. They can use a single time frame or multiple time frames when trading Forex and CFD charts.
Single time frame means that traders only analyze and trade based on one time frame. A single time frame can either be a short-term or a long-term time frame.
Multiple time frames mean that traders analyze and trade based on two more time frames. With multiple time frames, traders can combine short-term time frames and/or long-term time frames.
There are no rules for using Forex time frames in general and multiple time frames in specific. Traders can combine any time frame they like. But usually, traders do combine short-term and long-term time frames. That said, traders can also opt for combining short-term time frames or long-term time frames.
Long Time And Short Time Frame Trading
Traders can use Forex long time frames and Forex short time frames in their trading strategy and plan. The trading plan indicates the rules for the analysis, entries, and trade management.
Traders can use short time frame trading and/or long time frame trading in their trading strategy. Traders need to determine how they will use time frames in their trading plan.
Traders can fully decide how to use the time frames in their trading plan. There are no fixed rules. Here are the parts of a trading plan that you would want to consider:
- Price and chart patterns
- Support and resistance
- Stop loss and take profit
- Trade management
Different time frames can be used for these eight aspects. Although traders can use as many time frames as they like, most traders do tend to limit the multiple time frame analysis to two, three, or four time frames.
Using more time frames than three or four could actually create more confusion because of the paralysis of analysis. This is when traders are unsure what to do when.
How To Use Time Frames
Let’s review an example where three time frames are used:
- Highest time frame: analysis
- Middle time frame: trend
- All time frames: price and chart patterns
- Highest time frame: support and resistance
- Middle and lowest time frame: triggers
- Lowest time frame: entries
- Lowest time frame: stop loss and take profit
- Middle and lowest time frame: trade management
This is just an example. Traders can in fact use any combination of time frames for their short time frame Forex strategy or long time frame Forex.
Traders can start with any time frame they like. Then they can check higher time frames or lower time frames to check if their analysis or trading idea does not have any serious flaws.
For instance, traders can find an interesting trading idea on the 15-minute chart but realise that the setup is facing too strong support or resistance after analyzing the 4-hour chart.
Or traders can find an interesting trading idea on the 4-hour chart but realize that there is no interesting trigger or entry on the 15-minute or 60-minute chart (yet).
Usually speaking though, traders work with a top-down approach. They prefer to see the larger picture first before zooming into lower time frames.
Length Of Trades
The length of a trade usually goes hand in hand with the time frames. Short-term time frames often are short time frame trades whereas long-term time frames are usually long time frame trade Forex.
But it’s not a must. Traders who use multiple time frame analysis can analyze on higher time frames but use short-term time frames for short-lasting trades for instance.
What Did We Learn From This Forex Time Frames Guide?
This guide explained what Forex time frames really mean. What time frames are considered short-term and what time frames are considered long-term. Most traders see the 1 hour chart of lower as short-term and anything 1 hour as long-term. The article then reviewed how traders can combine time frames in their trading strategy and trading plan. Using one time frame is called single time frame trading or analysis whereas using more time frames is called multiple time frame trading or analysis. Traders can also combine time frames for different aspects of their trading. This article reviews how traders can use them for a long time and short time frame trading.
Common Questions On Forex Trading Time Frames
How Do You Trade With Multiple Time Frames?
Multiple time frame trading simply means combining two or more time frames into your trading strategy and plan. The opposite is called single time frame trading, which relies on just one time frame. The multiple time frames can be long time frame trading, short time frame trading or a combination of both long time and short time frame trading. For instance, a trader can analyse the charts on a daily chart and look for entries on a 1 hour chart. The daily chart is a long time frame trading and the 1 hour chart is a short time frame trading. By combining the two, traders are using multiple time frame analysis.
How Do You Trade Multiple Time Frames?
Traders can trade multiple time frames by assigning different roles for each time frame. Lower time frames are usually used for entries. Higher time frames are often used for spotting support and resistance levels, applying filters, and identifying the trend. But traders do not have to limit themselves to two time frames. Traders can even opt for combining three or four time frames. The benefit of using multiple time frames is that traders can use the different viewing points for different aspects of their trading strategy and plan. With three time frames, traders can use for instance the higher time frames for support and resistance and filters, the middle time frames for the trend, and the lower time frames for entries.
Is Short Term Trading Profitable?
Short term trading can be profitable. But most traders agree that only trading short term time frames (also called scalping) is more difficult and requires more skill and experience. Beginning traders should therefore make sure to practice enough analysis and trading before trading on lower time frames only. There are a couple of difficulties with trading short-term time frames: 1. the speed of price movement is faster and gives traders less time to react, 2. the costs of trading are relatively higher because the spread is a larger part of the profits, and 3. traders do not see the larger picture. One method that could be good for beginners is to combine time frames and use multiple time frames. This way, traders can use the benefits of higher time frames for their analysis while using the lower time frames for entries.