Choosing the Most Profitable Forex, Futures and Stock Trading Time frames

What are the best Forex time frames?

Research in this area turns up a few things…

Monday through Friday are all viable for day trading. Thursday tends to be the best day for trending. Friday has some risk if you are looking for swing trades because you would need to hold over the weekend. Day trading on Friday is typically fine especially when there are news events to power the markets.

We have found that for day trading 2am EST – 4am EST (New York Time is always used in this document to standardize) is a solid time frame to trade. For a while, we didn’t see a lot of opportunity that was reliable between 4am – 8am EST but in recent months we have found that the 4am – 7am EST is another viable time frame, in particular starting after the news time frame (so 5:00am EST or after.) Just realize you will many times have economic reports that can dramatically alter the markets at 4am – 5am EST depending upon the economic schedule. After that, 7am EST – 11am EST is the final (US session) time frame. This is the case for the U.S. and European crosses. If you add the Asian crosses to the mix, then 6pm EST – 9pm EST is viable.

Should you for a minute attempt to trade each time frame? Personally, we’d say no. Focus on one, two if you must. And if you book a winning trade – shut it down. Move along. That’s your best bet. There is always another time frame; don’t panic that you’ll miss the next great trade. More than likely you’ll find your way to going from a profit to a loss either through a bad trade, a mistake or just the simple odds of trading and then you’ll have to take another trade, thereby raising the trading stress, and so on.

If the whole idea of day trading is unacceptable to you, and realize here we are probably talking on an average session an hour and definitely under two hours, you can of course swing trade. There are options to swing trade daily charts, four hour charts, hourly charts, tick charts, etc. There is always a time frame that will suit your lifestyle perfectly.

What about Index Futures?

For us, that’s fairly easy. From 9:30am EST – 12:30pm EST is prime time. If we use our Power of Quitting techniques we’ll usually be done on average in an hour or less. Sometimes it doesn’t work that way and it goes over. In the afternoon? 1:50pm EST – 3:40pm EST and that is it. Forget the midday. Forget the afternoon if you don’t need it.

What about Stock Trading?

If you are day trading you can typically just use your Power of Quitting techniques and go until completion. You’ll see the activity will follow a similar pattern to what we see in the Index Futures – expect a definitely slowdown in the midday but typically if you are holding some trades through you’ll be able to follow your strategy and wait for activity to resume.

Commodities, Global Index Futures and More?

You are going to find that all of these markets will only be active for 50% or less of their respective trading days. You want to pare every market down to size. You should never have to trade the entire session. Ever.

I’m not day trading….

If that is the case, then time frames intra day mean little to you. Your trades will be influenced by this but if you are swing trading – you are going to buy trades and hold for multiple days or even weeks – then your best movement is probably happening in the time frame mentioned above. But ultimately you are watching the only things that matter – the high, the low and the close each bar whether that is daily, or four hours, or 377 ticks.

Minute Charts, Tick Charts, Daily Charts, Weekly Charts…

So many choices. Here’s what we like to do. When day trading we personally lean towards the tick charts. If we are day trading the index futures, one of the best for us is the 233 tick or, pulling out a little bit, the 377 tick. You’ll notice these are odd numbers. We like to use Fibonacci numbers. Could we have made it 230 and 375 instead? Sure, it probably wouldn’t make a huge difference in the charts themselves. However, much of trading is crowd psychology and we know that for the simple fact that thousands of traders trade using Fibonacci numbers, including for time frames where we’d rather see what they are seeing. Therefore it makes sense to do this rather than use a similar but random number.

You can read all about Fibonacci there if you like.

If we are trading Forex on a day trading basis? 55 ticks, 89 ticks and 144 ticks are the most common.

If we are swing trading Forex? 233 ticks can be a real nice one to swing trade off of, or 377.

The same works for stocks – we can trade with tick charts, or intraday with time charts such as 3 minute, 5 minutes, 10 minutes, etc. You just experiment with your chart settings until you find a range that seems to work best. If you go too small, you’ll have way too much activity and the trading strategy you use will probably become unreliable since you are now reacting off of any type of market noise. If you go too large, you’ll end up with trades that will require large stops to hang on with the swings to match the time frames. You may even get in too late many times since the charts are slower to form but you’ll avoid virtually all the noise. So, as you can see it is a balance, but it is not difficult to pull up a chart and just look at it and conclude in seconds that it will work, especially if you have a top notch strategy

That’s why it is crucial to have a strategy that works across all these time frames and markets. You’ll visually be able to decide in seconds what tends to paralyze many other traders and you’ll be settling on exactly what to trade in no time at all – always knowing you’ll have way more opportunities than you could ever pursue on your own.