When using charts to make trading decisions, you can choose between different spans of time when it comes to your chart.
Charting systems can offer timeframes ranging from tick by tick to monthly bars. Monitoring multiple timeframes can give you a greater perspective on the personality of a currency pair.
The smaller timeframes such as 5 minute and 15 minute are best suited for daytraders looking to scalp for quick pips. They are also good for swing traders looking for an opportune moment to make an entry.
The 1hr chart is for swing traders and long term traders looking for the momentary trend. The 1hr chart is well known for itÃÂ¢ÃÂÃÂs reliability on short term changes in momentum.
The 4hr chart is for long term traders. The 4hr chart is most useful for traders wishing to trade the daily chart that want to make a carefully timed entry.
The daily chart is best used for setting up long term positions on a currency pair.
Each of the different timeframes can give you clues to the personality of a trading pair. You can find out whether the pair tends to move steady during itÃÂ¢ÃÂÃÂs trends, or if it tends to stall often. You can find out if itÃÂ¢ÃÂÃÂs volatile during daily sessions, but steady over the week.
Viewing a currency pair in multiple timeframes can help you find good entry and exit points, depending on the strategy that you want to use. Daytrading a currency can make a lot of sense for traders looking to take maximum advantage of daily volatility, but keeping the daily trend in mind can help daytraders focus on the bigger picture.
The Bottom Line
Forex trading attracts many different types of traders with many different types of systems. If you want to trade a currency pair, itÃÂ¢ÃÂÃÂs best to become as familiar with it as possible. Viewing the currency pair in multiple timeframes is part of the process of learning itÃÂ¢ÃÂÃÂs personality. Understanding the currency pairÃÂ¢ÃÂÃÂs personality can help you in your success with trading it.