Traders choose that time frame that matched their own personality. You have to feel comfortable with the time frame you’re trading in. If you want to make quick money than signals generated on small time frames 1 or 5 minutes will be suitable for you but not for a person that is conservative in his/her trade and want reliable and sure signal.
A general rule is that the longer the time frame, the more reliable the signals being given. As you drill down in time frames, the charts become filled with more false signal.
We defined three types of traders – Long term trader, short term (swing) trader and intraday trader.
- A long-term position trader could focus on weekly charts while using monthly charts to define the primary trend and daily charts to refine entries and exits. This trader wouldn’t pay attention to market every day that gives more time to analyze each trader(see also news trading). If you choose to be long term trader you should have great patience because there will be 1 or 2 signal in a year.
- A swing trader, who focuses on daily charts for his or her decisions, could use weekly charts to define the primary trend and 60-minute charts to define the short-term trend. Swing traders have opportunity to catch more signals than long term traders.
- A day trader could trade off of 15-minute charts, use 60-minute charts to define the primary trend and a five-minute chart (or even a tick chart) to define the short-term trend. Lots of trading opportunities will have if your personality fits in this kind of trade. One of drawback are that you trade times more than other kind of traders and that will lead to more exhaustion. You will change biases very frequently because market will change therefore you should have strong discipline and trading plan.