Depending on the instrument being favored, traders tend to utilize price charts to figure out better buy and sell points, entry and exit signals as well as the best location of the take profit and the stop-loss orders in CFD trading. But there are also traders who choose to use a timeframe as it plays a significant role during the creation of the trading plan.
Types of Time Frames in Trading
You can choose the type of timeframe based on these aspects;
The Trading Strategy – this may include short-term trading strategies such as day trading and scalping or longer strategy like position trading and swing trading.
The Financial Market – there are markets that are highly volatile while others are not. This means that the financial market needs you to study more price actions. Most of the time, traders tend to utilize shorter time frames when analyzing the share and Forex markets.
The Type of Trading Chart – for candlestick and bar charts, they are mostly displayed clearly on the price chart. With Renko charts and line graphs, it shows you the overall price trend direction along with a smoothed-out appearance.
One-Minute Chart Time Frame
This time frame is just ideal for scalp traders or traders who aim to have small profits but in a frequent manner out of sudden price movements in the market. Scalp traders are ought to identify quickly the entry and exit points within a minute or less.
30-Minute Chart Time Frame
Another short-term trading strategy is the 30-minute time frame. This strategy not just identifies sudden price movements but also the possibility of breakouts and reversals on the support and resistance levels. This mostly happens due to the changes in the supply and demand of the asset that you are speculating.
1-Hour Chart Time Frame
This timeframe is often linked to intraday trading strategies because they are utilized in confirming the daily chart signals that are being used in relation to the four-hour charts. Day traders following a lower time frame like 1-minute or 30-minute charts, might find it confusing to keep up because they are always looking for chances to keep their trades open until the end of each trading day.
Daily Chart Time Frame
Now comes the tough to trade time frame – the Daily Chart Time Frame. If you choose to trade this time frame, you must be very patient. You will also encounter gapping and slippage from time to time, you must be prepared for it. But then, daily intervals are utilized in swing trading because this strategy looks into capturing swing lows and swing highs in the price movement of the asset you are trading. You will be required to monitor the price charts from time to time if you are using this strategy because every small reaction may create huge changes in the prices of the asset.
Make sure to familiarize these time frames before you enter your first trade. Knowledge will be your primary weapon to accomplish great deals of success in CFD trading.