Why is it difficult to be successful trading smaller timeframes?

Check out this article. Mainly, the article talks about slippage and stress that makes trading shorter timeframe (the likes of 1 min and 5 min) charts difficult.

Is anyone of you trading off the 1 min or 5 min charts and finding it a challenge to do so? Well, I for one, used to be trading on the 5 min charts. Allow me to share some of the reasons why I have stopped doing so:

• Slippage : when trading on such small timeframes, profit targets of 10-15 pips are the norm for respectable risk-reward ratios. But the spreads even for the majors can be from anything from 2 pips to 4 pips and are broker-dependent. Slippage takes  a huge cut out of the profits! This was discussed in the article above.


• Stress : Another point that was also discussed in the article is the stress that accompanies trading on smaller timeframes. I've got to monitor the charts closely for any split-second opportunities. When I am in a trade, I also have to monitor it closely to adjust my profit target and stop loss. A trade on the 5 min chart can typically close anywhere from 10 mins to an hour. Imagine the stress level and how one's psychology can be affected, especially when he/she has to monitor the charts and follow the candles tick up and down!


• Whipsaws : are more common in lower timeframe charts, especially if you are using market-maker, dealing desk type of brokers. The super long tails take out our stop losses before the price moves in our favour. How many times have you experienced this? Furthermore, I heard from an experience trader that some banks employ a big team of full-time scalpers to trade using the smaller timeframes. They always have an edge over us, the retail traders, because they can afford to have the fastest internet connection, the fastest PCs etc which are all very costly.


• Passive Income? : I intended for trading to be a passive source of income for myself. Of course I am aware that nothing can be truely passive. Well, at least I hope for minimal time investment. And I find trading on the 5 min charts very time-consuming, personally. I've got to monitor the charts while the trade is on. Not my type of passive at all. Contrast this to playing daily charts. After I entered a position, my trade will be there making money for me for the next few days or even weeks.


• Time to analyze the market : This point ties in to stress. Playing longer timeframe charts allows us to have the luxury of time to do more detail analysis. When playing short timeframe charts, decisions have to be made swift. One has to make use of tools to speed up the process, even for calculating number of lots to enter based on the stop loss and whether or not to take a trade based on the risk-reward ratios. What it takes is super discipline!

• High Frequency Trading : Increasingly, more institutions are adopting high frequency trading. In a nutshell, high frequency trading involves the use of super fast computers to execute many trades in split seconds. Many day traders feel that it is getting harder to make money day trading and they attributed that to high frequency trading. So when day trading, we are pitting against the machines as well!