Long Time Frame Or Short

In the books of technical analysis it says that signals have less technical inaccuracies in the longer timeframe, yet the vast majority of beginners start with scalping in the timeframe, 1 or 5 minutes. In this article we will describe the differences between making trading on the long and the short timeframe. Let’s compare some key features of the daily timeframe and that to 5 minutes.

Number of opportunities

In the daily chart you would wait several days before the conditions for trade are right. It is therefore necessary to have patience to wait for the right time. The graph in 5 minutes instead provides dozens of opportunities to open and close every day, the frequency of trade is much greater as well as stress.

Width stop loss

it is unthinkable to use a stop loss of 15-20 pips in a daily chart, just as it is absurd to have a 100 pip on a graph to 5 minutes. We must take into account the fluctuations in the period in question and leave the trade enough room to go in any direction. The stop loss will be large in the daily chart to give an idea about 100 pips, while the 5 minutes chart, an estimate could be 10 to 25 pips.

Location

The position will be calculated on the capital, risking only a small percentage of the total capital. At the same capital and then a position with a large stop-loss will be much smaller in absolute value than one with a stop loss a few pips.Target
Like the stop-loss targets also vary greatly. To maintain a good relationship risk / reward, traders in the daily timeframe will try to earn hundreds of pips per trade. While the timeframe below the target will be the order of tens of pip.

Weather in the trade

If we assume that to develop a trade needs some candles, we understand that the long timeframe require much patience to wait for the trade to be successful. It usually takes 1 to 2 weeks. The graph in 5 minutes instead applies the same principle in the sense that it takes some candles because a trade is completed. Obviously, as the candles of 5 minutes, the trader will hold an open position on average 20-30 minutes.

Open positions overnight

Open positions using the daily chart inevitably need to hold open positions overnight. Being a 24-hour market, Forex exposes the investor to market risk, even while sleeping. The intraday traders usually prefer to close all their positions before going to sleep. Having it as a target and stop loss few pips, would be dangerous to be exposed to fluctuations in the market while you are in front of the monitor.Hold open positions overnight also involves the rollover debits or credits by the broker. This is a topic that will be detailed in other sections.

News and economic data

The approach to the news varies widely depending on the time horizon. An intraday trader will pay close attention to all the major economic releases because they can jump prices to some tens of pips. In the daily chart instead intraday movements are only considered “noise” of the market and will not be taken into account the trader. The long-term traders rather analyze the basic data to understand if they can have an impact on long-term trend.

Time at the computer

A trader on the graph will have to control their daily chart just once a day to make their own decisions. They can then devote themselves other things during the day. With stop-loss wide, perfect entry is not required. The trader will look for the best entry of course possible but it is quite normal to see prices go against the desired direction of several tens of pips before reversing the route. The trader on the graph in 5 minutes instead will be at their computer several hours a day to identify opportunities and take advantage of it at the right time. It should be timing and precision in the short timeframe. Trying to capture market movements to varying degrees and speed it is essential to be focused and fast.

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