What is the best timeframe for intraday trading?
Well, there is no such thing as the best timeframe for Day trading, but to make money consistently
as a day trader in the forex and stock market, there are few things you should keep in mind.
If you have been following the Trading Rush channel for a while and have watched the "best
time to trade forex" video, you know not every market sessions are worth trading.
For example, you can probably make more money by trading during the London and New York
overlap session.
If you don't know anything about market sessions in forex, check that video out and maybe subscribe
to the Trading Rush channel while you are at it.
If you trade stocks where the market is only open for a few hours, choosing the right timeframe
where you can book a profit before the market close, can be challenging.
Most indicators don't rely on a specific timeframe, so they usually work on all timeframes the
same way.
But trading on a smaller timeframe can create few problems.
For example in the Forex Market, there is a lot of noise on the smaller timeframes such
as 1 and 2 mins.
Price action in the stock market is usually clean and good enough for trading even on
the 1-minute timeframe, but since there are thousands of stocks available for trading,
the results can vary from stock to stock.
Another problem with trading on the smaller timeframes is the spread.
Spread in the stock market can be a lot higher if there is low liquidity, but that can easily
be fixed by looking at the liquidity of stock before trading.
But in the Forex Market where many traders don't pay attention to the timings of the
different market sessions, the spread can become a huge problem.
When a new market session starts, the spread can get big very quickly which can turn a
profit into a loss.
Trade on a smaller timeframe, the noise, and the spread will make you lose money.
Trade on a higher timeframe and you will be stuck in a trade for a long time.
So what is the best way to trade forex?
And what is the best timeframe that doesn't involve problems like noise and bigger spread?
Well, here are few steps to find the perfect trade on smaller timeframes.
To make sure your trade hits profit and loss targets within a day and before the market
closes, first open the thirty minutes timeframe.
No, we are not going to trade on the 30 minutes timeframe, because if you trade on the 30
minutes, you will only have around 12 candles before the stock market closes, and if the
price starts to go sideways, you will be stuck in a trade until you or your broker closes
the trade for you.
Forex usually doesn't have such problems, but trading on 30 min and higher timeframes
can get your money stuck in a trade for a long time.
As a day trader, that's not what you want to do.
To find the perfect timeframe, first look at the long term trend direction on the 30
minutes timeframe.
You can simply use the 200 period moving average to do that.
Furthermore, it is a good idea to mark the clearly visible support and resistance areas,
because on smaller timeframes, you don't want to buy at the resistance of the higher timeframe
and vice versa.
Once you have found the trend on the 30 min timeframe, and since there is no one best
timeframe in trading, and since indicators don't depend on a specific timeframe, all
the timeframes between 5 and 30min are perfect for day trading.
There are only 3 main timeframes between 5 and 30 mins. 5mins, 10 mins, and the 15 min
timeframe.
You can trade on other custom timeframes like the 4 or 7 mins if you have the option, but
since most traders will look at 5 10 and 15 as their main intraday timeframes, you probably
should too.
Remember, as a stock trader if 5 mins is too slow for you, you can trade on 1 and 2 min
timeframe, as long as there is less noise and the spread is good.
Trading stock on 1 and 2 mins timeframes can benefit traders to trade the stock market
gap opens.
But in the forex market, 1 min timeframe has a lot of noise.
This doesn't mean they can't be traded.
In fact, in the liive trading videos and the small account challenge series, I have traded
both forex and the stock market on the 1 and 2 mins timeframes.
Here, since we are talking about the best intraday timeframes where price action is
clear and easier to read, 5 10 and 15 mins are the preferred timeframes.
Once you have found the trend on the 30 min timeframe, switch to the 15 min timeframe
and look for entry signals in the direction of the 30 min trend.
For example, if the trend direction on the 30 min timeframe is up, we will look for long
entry signals on the 15 mins timeframe.
Since MACD was the best performing strategy we have tested on the Trading Rush channel,
let's say we are using the MACD indicator to find entry signals.
If there is no trading opportunity on the 15 min timeframe, switch to the 10 minutes
timeframe.
Look for trades in the direction of the long term trend, because it is better to trade
in the long term trend direction to have a higher probability of making a profit.
If there are no trading opportunities, switch to the 5 min timeframe and if there is still
no trading opportunity, just come back later, the market is not going anywhere.
But if you do find a trading opportunity in the long term trend direction, remember to
calculate your profit target before entering the trade.
Make sure not to set your profit targets way too far, otherwise they won't be reached before
the market close.
And if you are a forex trader who trades only during a specific market session or during
an overlap, lower your reward to risk ratio if the price doesn't have enough time to make
a big move in your favor before the session ends.
If you don't care about market sessions, keep your trades running.
Just remember that price can get more or less volatile when one market session ends and
a new session starts.
So the important points to note from this video are.
Number 1.
There is no such thing as the one best intraday timeframe, but trading on the 5 10 and 15
mins timeframes can be a good idea because of the easier to read price action.
1 and 2 mins are tradable but can have a lot of noise and big spreads.
Number 2.
Use the 30 mins or higher timeframe to find the trend direction.
Then prefer taking trades in the direction of that trend on the smaller timeframes.
Sometimes, 30 mins and the smaller timeframe will show different trend direction, and that
is fine.
Since we are trading in the direction of the long term trend, reversal on a smaller timeframe
is not really a reversal.
It is more of a pullback reversal in a trend.
I have explained this in more detail in the Reversal Trading Video.
Number 3.
If you are a trader that likes to trade gap opens in the stock market, you can benefit
from the 1 and 2 min timeframes.
Just remember that price can go in the opposite direction quickly at the gap open.
Number 4.
Even if you are an intraday trader, it is a good idea to look at the swing trading timeframes
to find other major support and resistances that are not visible on smaller timeframes.
To find strong price levels, you can even look at the daily timeframe first, and narrow
your search down from there.
You don't have to scan every single timeframe below daily.
Analyzing daily, 4 hours, 1 hour, and the 30 min timeframes are good enough to get the
big picture.
So that's all.
Like the video if you liked it.
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Thanks to everyone for watching.