Multiple Time-Frame Analysis - Best Timeframe to Trade Forex

Multiple time frames analysis equals using 2 chart time-frames to trade Forex currencies - a shorter one used for trading & a longer one to check Forex trend.

Since it is always good to follow the market trend, in Multiple Time-frame Analysis, the longer time-frame gives us the direction of the long-term trend.

If the long-term market direction supports the direction of the smaller chart time frame then the probability of being profitable is greatly increased. This is because even if you make a mistake the long-term trend will eventually save you. Also if you trade with direction of the market, then mostly you will be on the winning side, this is what this analysis is all about.

Remember there is a popular saying by many Forex and stock market investors that says: "The trend is your friend' - never go against the market.

There are four different types of Forex traders - all these use different charts to trade as explained below.

Examples of how each type of trader uses multiple Time Frames analysis strategy:

Scalpers - Best Timeframe to Trade Forex

This group holds on to their trades for only a few minutes. The scalper never holds on to a trade for more than ten minutes. With the objective of making small amounts of pips as profit, 5 - 20 pips.

A Scalper using 1 minute chart wants to go long, checks 5 minute chart, which looks like the one below, since 5 minute show trend is going up, then decides from this analysis it is okay to buy.

Best Timeframe to Trade Forex

Day Traders - Best Timeframe to Trade Forex

This group holds on to their trades for a few hours but not more than a day. With the aim to make quite a number of pips, 30 - 100 pips.

Day trader trading 15 min chart wants to go long, checks 1 hour chart, which looks like the one below, since 1 hour shows market trend is going up, then decides from this analysis it is okay to buy

Best Timeframe to Trade Forex

Swing Traders - Best Timeframe to Trade Forex

This group holds on to their trades for a few days to a week. With the aim to make a large number of pips, 100 - 400 pips.

Swing trader using 1 hour chart wants to go short, checks 4 hour chart, which looks like the example below, since 4 hour shows the trend is going down, then decides from this analysis it is okay to sell.

Best Timeframe to Trade Forex

Position Traders - Best Timeframe to Trade Forex

These are the traders that hold on to their trades for weeks or months. With the aim to make a large number of pips, 300 - 1000 pips.

Position trader using daily chart wants to short sell, checks weekly chart, weekly looks like one below, since weekly shows the trend is going down, then decides from this analysis it is okay to sell.

Best Timeframe to Trade Forex

How to Define A Forex Trading Trend

Using a trading system has 3 indicators - MA Crossover System, RSI and MACD and uses simple rules to define the trend. The rules are:

Upward trend

Both MAs Moving Up

RSI above 50

MACD Above Centerline

Downwards FX Trading Trend

Both MAs Moving Down

RSI below 50

MACD Below Centerline

For More explanation about this system read: How to Generate Trading Signals with a Forex System.