timeframes
Trading Forex

What time frame makes you the most money?

There is a wide range of time frames to choose from when you are going trade the Forex markets. What determines the time frame you choose often has to do with what kind of time you can devote to trading on a daily basis, or what your appetite for market “action” is.
If you have several hours a day to devote to trading, you may choose to trade the 15 minute or the 1 hour charts. If you have only a few minutes a day, the daily charts might be better suited to you. Perhaps you are a buy individual but can tear away to check your charts once in a while, the 4 hour might be best suited to you.
On the other end of the spectrum, you might be one of those people who love the action of a quick market and the thrill of the trade. Getting in and out in a matter of minutes might be just what the doctor ordered. Placing several trades in your personal trading session might be ideal, in this case, you would be best suited to scalping the market on a 1 minute or 5 minute chart.
Perhaps you are in need of a slower pace. You might need more time to consider your trade and to properly evaluate the market conditions. You like to take your time and calculate your buy stops and your profit levels. You might want to come back to your charts several times over the course of a day and continually move your stops, monitoring the trade as it goes. This is the case where you would want to trade anything from the 1 hour to the daily time frames.
So, this begs the question, if you could trade any time frame at all, which time frame would be the one that makes you the most money?
In a nutshell, the smaller the time frame, the more opportunity you have to make more money.
Let’s break this down. Let’s say you are using a 2% risk on each of your trades, long term or short term.
On a daily chart, your stop loss might be 200 pips and you have figured out how many lots you need to trade to only risk 2% if you get stopped out. You place your trade and it takes 10 candles to mature and hit your take profit which is double your stop, 4% gain. Those 10 candles equal 10 trading days, or 2 weeks (5 days a week). It took you 10 trading days to earn your 4% gain. Not bad for 10 days of work.
Next, let’s look at a 1 hour time frame. You find a trade and you calculate your stop loss is 25 pips. Again, you find the number of lots you need to trade to risk 2% on the trade, so if you get stopped out you will only lose 2% of your total trading capital. You take your trade and this one also takes 10 candles to mature and hit your take profit level which was double your stop at 50 pips. This time it took you 10 hours to make 4%. On the 1 hour chart this is a trade that you can make once a day, or 5 times a week.
So far, it took you 10 trading days to make 4% on a daily time frame.
On the 1 hour time frame you could have made 10 trades in the same 10 trading days, each potentially gaining you 4% for a total of 4% x 10 days = 40%
What happens when you drop down to a 5 minute chart? You can make 2 or 3 of these trade a day, each earning you a potential of 4% each, or 8% to 12% a day.
I will leave the scalping trades out of this, these are a whole different beast so we won’t touch on them, but there too is the opportunity to earn a substantial daily return.
What it comes down to is frequency. The more you can place a trade, the more opportunity there is for gains repeated.
The smaller the timeframe, the bigger the potential becomes to make the most money.
Best regards

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