Trading Short Timeframes Vs Long Timeframes

In my last post, I discussed about how can one know that he/she is trading a unsuitable timeframe. And I found 2 other articles that supported my claim:

• Glen De Vadder wrote about how can one determine which chart timeframe is suitable. He broke down chart timeframes to 3 main types, namely, intraday, swing/position and long-term. In summary, aspiring traders will a job should go for swing/position or long-term timeframes - hourly charts and above.


• The team from PFX is more for trading long timeframes. They mentioned about the spread - yes, trading short timeframes incur more trading cost in terms of the spread because more trades are taken and of course, the emotional stress that comes along with short term trading.

One interesting point to note. Both articles mentioned about rollover, but from a different standpoint. In my interpretation, rollover is a double-edge sword. Whether you collect or is charged a rollover depends on the position and the currency pairs that you are trading. So we will have to take note of this if we are holding our positions overnight.

One point that is still not addressed any where is: whether trading short timeframes or  trading long timeframes is more profitable?

I would think they are equally profitable. Let's see if we can convince ourselves.

From the USD/JPY daily chart, the 60-day average true range (ATR) is around 90 pips to 200 pips

The 60-day ATR for a 5 min USD/JPY chart is around 15 pips to 5 pips.

So when trading the daily charts, my stop loss would have to be at least 200 pips while my stop loss for the 5 min charts would just have to be at least 15 pips.

Let's say I have a strategy that gives me 1:1 risk-reward ratio with a success rate of 60%. In addition, let's say the strategy, when applied on the daily chart, takes 3 days to close with a winner and makes 200 pips. In order for me to make 200 pips in 3 days on the 5 min chart, I would need to make 200/15 = 14 winners. But all in all I have to make 24 trades since 60% of my trades are usually winners.

So I would need roughly 8 trades per day on the 5 min charts to match a win on the daily charts. So which is more profitable? In my opinion, once I made 200 pips on the daily charts, it is a done deal. Imagine I have to make 24 trades on the 5 min charts to make that same profits...

Signs To Tell That You Are Trading A Unsuitable Timeframe

Trading 5 min charts has more money-making opportunities?

You can be trained to trade in any timeframe?

Think again. I also went through what most aspiring traders went through. I used to think trading the 5 min timeframe was suitable for me because of the adrenaline rush, as there were more entry opportunities. Most men like this type of adrenaline rush :-P However, I still feel that trading the shorter timeframe is good for brushing up trading skills. After trading the 5 min timeframe for a period of time, my observations tell me that the 5 min timeframe may not be suitable for me. Let me share my observations with you.

I have a full-time nine-to-five job. Most aspiring traders do (some own businesses of course). I realized I have been missing out on many good trade setups because they happen during the time when I am working! Good trades are hard to come by. Missing out on good trades really takes a  toll on my psychology.

I did try to force myself to trade while working. I adjusted my work schedule and tasks such that I would be able to monitor the charts as frequent as I can. You think this helped? NO! It made things worse. On one hand, I felt stress from my job. On the other hand, because it wasn't easy for me to find time to monitor the charts, somehow my brain started to see things. I saw trade setups that were not there! As a result, my trade quality took a hit.

You think I am able to trade after work? Ya, ya...forex is a 24-hour market right? Bad news. In my part of the world, by the time I reach home after work, it is almost close to the US market opening hours. Prior to the US market opening and even during the US market hours, there are often market-moving economic news announcement that cause the forex market to behave haphazardly. We are often taught not to trade around high impact economic news announcements right?

Well, I can trade into the wee hours of the night right? Sad to say, the forex 5 min charts typically quietens down after around 10:30 EST. There may be some movement around 12:00 EST when the London market closes. After which, I had to wait all the way till 16:00 EST (around 4 am local time) for possible movements on the 5 min charts. Imagine you are home after a tiring day at work and got to stare hard at the computer screen all the while. Stressful isn't it? Both physically and psychologically.

A fellow trading course mate also showed me the evidence that a suitable timeframe is crucial to one's trading success. We learnt the same 5 min chart trading strategies but he had much greater successes! Upon probing, I learnt that his working hours are totally opposite of mine! He works in the night only and has all morning and afternoon to trade.

Unfortunately, there is no one magic formula to determine which timeframe is the most suitable for you. The only way is to try trading the timeframe and evaluate yourself. Everyone's working hours is different, isn't it? :-P