The Benefits of Trading the Higher Time-Frame Charts

Filed under: Learn Forex Trading |

A lot of people new to trading forex tend to be attracted to trading on the lower time-frame charts. The time frames available on trading platforms such as Metatrader generally include M1 (one minute), M5 (five minute), M15 (fifteen minute), M30 (thirty minute), H1 (one hour), H4 (four hour), D1 (one day), W1 (one week), and MN (one month).  Many beginner traders do not have the patience to watch a chart that only updates once a day or once per week, so they naturally go for the shorter time frames. However, this can be a mistake for a number of reasons.

 

To begin with, the market spread has a much bigger impact when trading the lower time frame charts. For example, if you take a trade on a daily time frame with a wide stop and target of 300 pips, then a spread of 20 pips is not going to eat into your profits too much. However, if you take a trade on a five-minute chart with a tight stop and target of 40 pips, then a spread of 20 pips is going to be very significant indeed, and will in fact take a half of your profits.

 

Another reason not to trade on the lower time frame charts is because the levels of support and resistance are not as reliable.  On the higher time frame charts such as a daily chart, these levels of support and resistance are much more reliable because more people are using them. Moreover, when trading the higher time frames, you are not as rushed and have more time to consider the market; but on the shorter time frames you have to make quick decisions before the setup gets away from you, and beginner traders should certainly not be making quick, snap decisions such as this. So if you are struggling, why not move over to the higher time frame charts? It could be just the thing to get you back on track.

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