{"id":9945,"date":"2022-10-14T06:50:00","date_gmt":"2022-10-14T06:50:00","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=9945"},"modified":"2022-10-14T06:50:00","modified_gmt":"2022-10-14T06:50:00","slug":"what-time-frame-should-you-trade","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/10\/14\/what-time-frame-should-you-trade\/","title":{"rendered":"What Time Frame Should You Trade?"},"content":{"rendered":"\n

What time frame should you trade your system on?<\/p>\n\n\n\n

The smaller the timeframe, the more difficult it is to develop a successful system.<\/p>\n\n\n\n

In other words, developing a system to trade on a 5-minute chart is more difficult than developing a system that trades on a daily chart.<\/p>\n\n\n\n

There is a lot more noise on the smaller timeframes. <\/strong><\/p>\n\n\n\n

Given the massive amount of data you would need to test the system over the years and years of different data, it can be a challenging task.<\/p>\n\n\n\n

Smaller timeframes often mean less profit per trade and less risk per trade.<\/strong><\/p>\n\n\n\n

It\u2019s a good idea to strike a balance between your trading account size and the risk you are willing to take.<\/p>\n\n\n\n

The New Trader\u2019s Trap<\/h2>\n\n\n\n
\"New<\/a><\/figure>\n\n\n\n

Let\u2019s take a look at what\u2019s called the \u201cNew Trader\u2019s Trap\u201d:<\/p>\n\n\n\n

  1. The smaller your trading account, the smaller the time frame you should trade.<\/li>
  2. The smaller the timeframe, the more difficult it is to trade.<\/li><\/ol>\n\n\n\n

    Do you see the trap here?<\/p>\n\n\n\n

    New traders often come into the trading world with very little cash, hoping to make a quick buck.<\/p>\n\n\n\n

    So they trade small timeframes because they think intraday trading is the way to make money.<\/p>\n\n\n\n

    They start trading on a 1-minute or 5-minute chart in hopes to scalp the market a few pips here and there.<\/p>\n\n\n\n

    By doing so, they suddenly put themselves in a very difficult spot because they are trading a very difficult timeframe when they are least experienced!<\/p>\n\n\n\n

    They set themselves up for a quick fail.<\/p>\n\n\n\n

    It\u2019s much easier to develop profitable trading systems on a daily time frame than on a 5-minute chart<\/strong>.<\/p>\n\n\n\n

    Because of this, we recommend that new system traders build trading systems on daily charts.<\/p>\n\n\n\n

    It doesn\u2019t matter if you ever plan on trading those timeframes. You do it to build confidence and skills in developing profitable systems.<\/p>\n\n\n\n

    Because you are more likely to develop a profitable system on a daily chart than a 5-minute chart, you should start on the daily chart.<\/p>\n\n\n\n

    Why bang your head against a wall and discourage yourself? Build your confidence and skill level then move on to more difficult intraday timeframes.<\/p>\n\n\n\n

    Should you scalp?<\/strong><\/h2>\n\n\n\n

    Scalping is something that intrigues many system traders. The challenge of taking small, consistent trades from the market daily while risking very little is appealing.<\/p>\n\n\n\n

    With scalping, it\u2019s generally expected you are trading from a small time frame, probably 5-minutes or less.<\/p>\n\n\n\n

    The idea is to open a position and capture only a few pips of profit.<\/p>\n\n\n\n

    The appeal is since we are trading from such a small timeframe, your risk is small, which means you can trade with a small account.<\/p>\n\n\n\n

    Often you will have setups that produce high win rates and occur more frequently than setups on a higher timeframe such as hourly or daily.<\/p>\n\n\n\n

    There tends to be a higher frequency of trading opportunities with scalping which can potentially lead to large accumulated profits versus your starting account balance.<\/p>\n\n\n\n

    Scalping for the retail trader is very difficult to do.<\/p>\n\n\n\n

    Almost all retail traders who try scalping will fail.<\/p>\n\n\n\n

    If you\u2019re new to trading, we wouldn\u2019t recommend it. Why?<\/p>\n\n\n\n

    When trading in these timeframes, you are competing with\u00a0high-frequency trading<\/strong>\u00a0(HFT) firms running automated trading programs (algos) built by a team of Ph.D. brainiacs.<\/p>\n\n\n\n

    It\u2019s like a basketball newbie trying to play LeBron James.<\/p>\n\n\n\n

    \"HFT<\/a><\/figure>\n\n\n\n

    Other significant barriers are the transaction cost<\/strong> in both the spread<\/strong> and slippage<\/strong>.<\/p>\n\n\n\n

    The difference between what a buyer will pay and what the seller will receive at a given point in time is referred to as the\u00a0bid-ask spread.<\/p>\n\n\n\n

    Your broker buys from you at a lower \u201cbid\u201d price, while selling to you a higher \u201cask\u201d price.<\/p>\n\n\n\n

    The bid and ask prices are your broker\u2019s quoted prices or \u201cquotes\u201d.<\/p>\n\n\n\n

    The bid-ask spread is used as a proxy for transaction costs.<\/p>\n\n\n\n

    The quoted spread measures the cost of completing a \u201cround trip\u201d (buy and sell)order if trades are executed at the quoted prices.<\/p>\n\n\n\n

    Transaction costs for a single trade are often measured as half the spread<\/strong>.<\/p>\n\n\n\n

    If you\u2019re paying a 2-pip spread to enter and exit a trade and make a 4-pip gain, half (50%) of your profits are going to paying the spreads!<\/p>\n\n\n\n

    Scalping means smaller profit per trade yet, as you drill down to smaller and smaller time frames, your costs remain fixed<\/strong>.<\/p>\n\n\n\n

    If you traded on a slower time frame like a daily chart and made a 400-pip gain, you\u2019d pay 0.5% of profits to pay the spreads versus 50% in the previous example. That\u2019s a big difference!<\/p>\n\n\n\n

    As the negative impact of transaction costs and slippages grows, this takes a more significant percentage of your profits.<\/p>\n\n\n\n

    A single pip of\u00a0slippage\u00a0is hardly noticed when you are holding a trade for several days with an average profit of $100 per trade.<\/p>\n\n\n\n

    However, on a scalping system, a single pip is the difference between life and death<\/strong>.<\/p>\n\n\n\n

    Then throw in latency, computer issues, internet issues and your margin for error is tiny.<\/p>\n\n\n\n

    Again, on larger timeframes, you can exit a trade now or in a few seconds, and it won\u2019t matter that much.<\/p>\n\n\n\n

    Not so in the scalping world where everything is hypersensitive, and your margin for error is tiny<\/strong>.<\/p>\n\n\n\n

    In closing, if you\u2019re new to building trading systems or don\u2019t already have strategies trading live on the market that\u2019s making money, focus on building systems on higher timeframes first.<\/p>\n","protected":false},"excerpt":{"rendered":"

    What time frame should you trade your system on? The smaller the timeframe, the more difficult it is to develop a successful system. In other words, developing a system to trade on a 5-minute chart is more difficult than developing a system that trades on a daily chart. There is a lot more noise on […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[831],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9945"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9945"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9945\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9945"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9945"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9945"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}