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Timeframes in the foreign exchange market (the ‘Forex market’) provide different perspectives on a particular currency pair or any tradeable financial instrument over fixed time intervals. It’s about perceiving a market through different lenses, offering unique insights into longer and shorter-term price movements.
A timeframe reflects the interval of a candlestick or bar on a price chart, usually ranging from a monthly interval to a one-minute interval. For example, a monthly timeframe represents a month of trading through a single candle; a weekly timeframe represents a week’s worth of trading in one candle; a daily candle represents a day of trading; an hourly candle prints each hour for an hour of trading, and so on.
Higher timeframes offer a smoother picture of price action of the currency pair you are trading. These generally consist of the monthly, weekly, and daily timeframes (and sometimes the 4-hour timeframe).
Figure 1 below represents the monthly, weekly, and daily timeframes for the EUR/JPY currency pair (euro versus the Japanese yen). These larger timeframes give Forex traders an enlarged picture of the pair, enabling better identification of the underlying trend and helping establish a directional bias for future trades. Traders then apply this information to their analysis and typically seek positions corresponding to the trend’s direction.
As you can see from the three timeframes below, the monthly and weekly timeframes are trending higher; they show that the EUR/JPY is in an uptrend: a series of higher highs and higher lows. The daily timeframe – albeit still technically in an uptrend until forming a low, a lower high, and a subsequent lower low – is, however, demonstrating signs of weakness in the trend.
Figure 1 – Chart Created Using TradingView
Lower timeframes exhibit greater volatility as they measure intervals over shorter time periods. The lower timeframe’s price movement can be extreme, particularly following the release of a surprise news event or an unexpected comment from a central bank speaker.
Unlike trading on higher timeframes, lower timeframe trading can deliver more trading opportunities. However, the trade-off is that while more trades are available on the lower timeframes, they tend to be difficult to trade, given the more frequent price fluctuations (volatility).
Lower timeframes can also be difficult to trade successfully due to psychological challenges, as shorter-term traders are constantly under pressure to make short-term decisions. This is unlike trading on the higher timeframes, which are slower and often recommended for beginner traders.
Figure 2 below shows the 1-hour, 15-minute, and 1-minute charts for the EUR/JPY currency pair. As evident from the three charts, the 1-hour timeframe represents a pullback in the down move noted on the daily timeframe (Figure 1). The 15-minute timeframe highlights a magnified view of the 1-hour pullback (showing the potential for a head and shoulders top pattern), while the 1-minute timeframe shows a short-term downtrend.
Figure 2 – Chart Created Using TradingView
Changing timeframes is straightforward on most trading platforms.
For MetaTrader 4 (MT4), you have access to 9 timeframes, while on MetaTrader 5 (MT5), you have access to 21 timeframes. Both trading platforms offer access to timeframes on the upper panel, as shown in Figures 3 and 4.
Figure 3 – MT4 Chart
Figure 4 – MT5 Chart
With cTrader, 26 timeframes are available, and similarly to MT4 and MT5, timeframes are accessible on the upper panel (Figure 5).
Figure 5 – cTrader Chart
If you have a live, active cTrader account with FP Markets, you can use TradingView’s charting package to trade. TradingView offers several timeframes, from second to 12-month timeframes, which can be customised to suit. These can also be found on the upper panel (Figure 6).
Figure 6 – TradingView Chart
Timeframes are a key consideration and will depend on the trading style selected.
Longer-term trading, almost an investment-style approach, is called position trading. These traders focus primarily on the higher timeframes, the daily, weekly, and monthly timeframes, and assess (and trade) the longer-term trends. Position traders hold their trades open for months at a time, sometimes years, often including both technical analysis and fundamental analysis (macroeconomic analysis).
Swing trading tends to operate using the 4-hour and daily timeframes. As the name implies, swing traders attempt to trade the swings of the Forex market. So instead of attempting to ‘ride a trend’, as a position trader does, a swing trader would attempt to trade the corrections and pullbacks in a trend, often using support and resistance and fundamental analysis.
Scalpers and day traders are short-term traders who use lower timeframes, from the 1-minute to the 1-hour timeframe, and generate trading ideas using technical and fundamental analysis. They may trade the news – trading into and trading out of news events is common – or focus solely on algorithmic trading strategies using technical analysis, for example.
Many traders use a multi-timeframe approach, knowing that higher timeframes identify the bigger picture and lower timeframes scale in on price action.
A trader can work from the top down using simple support and resistance levels, analysing the timeframes until reaching their ‘traded timeframe’. For example, a trader may find that the monthly timeframe’s price action is trading at support, and on the daily timeframe, price action recently breached resistance and has scope to approach another resistance. This tells the trader that not only is monthly price action trading at support but the daily timeframe shows room for further buying. If the traded timeframe is the hourly chart, the trader can attempt to locate a long (buy position) on the short-term hourly chart in line with what they’ve found on the higher timeframes. This could be simply that the H1 is testing support.
Traders may include trend direction in multi-timeframe analysis, in addition to technical indicators, such as Bollinger Bands, the Average Directional Index (ADX), moving averages, and even harmonic or Fibonacci analysis.
1. What are the timeframes in Forex trading?
A timeframe in the Forex market allows traders to view price action over different intervals, providing a longer-term and shorter-term view.
2. Do traders use every single timeframe available?
No. Traders regularly use only a handful of timeframes usually representative of their trading style.
3. Can I trade successfully using only the daily timeframe?
Each trader’s approach is unique, and they will prefer different strategies regarding timeframes. However, traders rarely use only one timeframe to trade, particularly those who use technical analysis to generate trading ideas.
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