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Time Frame refers to the period or time a forex trader chooses to operate on a forex chart. You can choose the time length of the candlestick by selecting the time frame ranging from 1 minute to 1 month on the forex chart.
Currency traders, use multiple time frame to analyze and track a trade. When you place a trade, no matter the time frame you choose, the result will still be the same.
Multiple time frame analysis are needed, when you need to carry out proper technical analysis.
Different time frames give you different picture of the market. It is like zooming in and out of a map. For example, if you want to see the precise changes in the market right now, look at a 1 minute to 5 minutes chart.
For clear and better result, you look at the medium and higher time frames like 4 hours, daily or weekly chart.
Time frames are divided into three categories viz: short term, medium term and long term time frames.
Short term
Short term time frames, range from 1 minutes to 15 minutes. They provide a trader an idea of the current market conditions. Scalpers often focus more on these time frames for execution of trades.
Medium term
Medium term time frames, range from 30 minutes to 4 hours. They give a better picture of the market owing to the fact that they are not noisy, on like short term time frames, traders make out good analysis on these time frames because the market trends seem to appear clearly on these time frames.
Long term
Long term time frames, range from daily to monthly period. These time frames are used for proper analysis because, trend lines resistance and support levels can be done on these time frames. Traders use these time frames for proper trading setup.
Note:
Professionals use higher time frames to setup a trade and execute it on a lower time frames. Day traders run multiple time frames from a minute to a day time frame to know the market conditions. They make sure this time frames correspond with each other before they choose a signal. If they are not in line with each other they have to wait until they all align with each other. Signals can be confirmed with the aide of technical indicators such as: RSI, MA and MACD technical indicators. These indicators are the best, and they are user friendly. To get a clearer picture of the signals, check the weekly and monthly time frames, they will enable you know the past market conditions, then relate it with the lower and the medium time frames.
Don’t rely on time frame analysis only, support it with fundamental analysis as well, because, fundamental analysis plays a key role in forex market. Whatever you see on the forex chart, is as a result of the effect of the economic indicators. Whenever a new candlestick is formed, irrespective of the time frame, wait for about 30 minutes after you have done your time frame and fundamental analysis for proper signal directions.
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