Are You Addicted To The Lower Time Frames?

One of the common myths of trading is that if you are short of time then you should trade on the lower time frame charts such as the 1 minute/5 minute and even 15 minute time frames.  Most novice or aspiring traders have a job or other such priority in their life, which takes up most of their time.  So when short of time, and at first glance, trading on the lower time frames  would seem a perfectly reasonable choice and action to take.

However, there are several things going against that assumption as the smart thing to do:

Firstly, when trading on these lower time frames, without any regard for the higher time frame charts, then you are trading without much context of what is going on and setting up – e.g. the bigger picture.  Not knowing the context of your trades within the bigger picture can see you having multiple losing trades.

Secondly, trading on these lower time frames means that you are in ‘The Market Noise’ and are liable to be taken out by whipsaws and stop hunts as bigger institutions and banks fill their orders (they fill their orders by taking out your and other novice traders’ stops).

Thirdly, by trading on the 1m/5m and even 15m charts, whether you are making or losing money, you get instant visual feedback which then tranlates into adrenalin/emotion.  So irrespective of making or losing money, you can give your brain instant gratification and excitement and thus trading these time frames can be highly addictive.

Trading Addiction - www.ForexTradingLondon.comNow that is not to say that as an experienced trader one can’t trade successfully on lower time frames providing that one knows what one is doing and the conditions and pitfulls to expect.

I will sometimes go down to the 15m chart and maybe enter a trade, but it will be occasional and it will be in the context of a higher time frame setup and will afford me a better entry, but I will manage the trade based upon the higher time frame setup.  Also there are some great 15m strategies out there but they need to be used in the context of the bigger picture.

Conversley, trading the higher time frame charts allows you more time to think and react, provides far less scope for emotional/addrenalin addiction and can make for a less stressful and more profitable way of trading the financial markets.

Top Trading Tip:  If you are learning to trade then it may be far more advantageous both in financial  and time saving terms to trade from the higher timeframes.  Start at the top on the Monthly, then Weekly and then the Daily and 4hr charts to see the bigger picture and potential trade setups, this should then afford you more time do the other things in your life and give you time to plan and think about your potential and actual trades.  You will have to alter your position sizes to cater for the stop loss sizes and ig you have insufficient capital in your trading account to do that then stop trading live, switch to a Demo Account and save money regularly for your Live account trading in the future.