Most traders start of trading the financial market using shorter time frames because they think that trading the shorter time frames will make them more money faster because that is what they want- to get rich quicker.
When I say shorter time frames I am talking about M1 M30 H1, and H4
Yes it’s true, more setups are formed on shorter time frames than on daily, weekly and monthly, but this doesn’t mean more profit because of the following reasons I am going to talk about here on this post.
#1. Too much market noise
By “Market noise” I am referring to the random price movements that occurs on shorter time frame charts. The shorter the time frame the more the random the market prices.
This is one of the reasons why trading on those shorter time frames can be more challenging and difficult. To fully understand what I am talking about, let’s take a look at EUR/CHF on two different time frames. 1 minute timeframe and a daily time frame.
EUR/CHF on 1 minute timeframe
Eur/chf on a daily timeframe
Notice that daily chart is clear/clean and less random moves and for that reason you can see where the trend is heading and it becomes much easier to make trading decisions, whilst on a M1 it’s hard to tell where the trend is heading, therefore it becomes very harder to predict the trend or the market price.
Shorter time frames can be very difficult to learn and master since there are many random moves that can be quite difficult for many to become successful.
#2. Monitoring your trades
Trading on shorter timeframes means you have to sit in front of your computer waiting for setups and monitor your traders for hours everyday and that can affect you physically. Also, if you have a full time job, trading on shorter time frames will not work for you since it’s time consuming.
#3. Not enough pips
Focusing on the shorter time frames means ignoring the bigger picture that is been painted on higher time frames. Those who trade on shorter time frames ignore the bigger trends that causes big moves and therefore they only look for small profit by going in and out of positions.
If you trader on shorter timeframe you won’t make the same pips you would make on a daily charts. It is very important that you look at the bigger picture.
#4. spread is much higher on smaller timeframes
Since traders who use shorter time frames trade a lot, their transaction cost are much higher than those who trade on daily, weekly and monthly time frames because you have to pay spread for each and every trade you place and this impact your profits.
A trader trading on a M30 chart can take 30 trades per week and Only make 300 pips from all the trades combined whilst a trader trading on a dairly timeframe can take 2 trades and make more than 300 pips.
The truth of the matter is that trading more frequently has a negative effect on your trading account. In fact, statistics show that swing traders who trade relatively infrequently consistently make more money on average than day traders and scalpers.
#5. Shorter timeframes are stressful
Trading on short time frames means you must be in and out of traders in a matter on minutes/hours. this means you must make split second decisions because you have less time to plan for you setups and that needs a lot of concentration therefore it has too much pressure and it can be very stressful compared to higher time frames.
Trading doesn’t have to be hard and stressful. Traders who try to trade on shorter time frames will be doomed to failure sooner or later.
You don’t really have to believe me or anything you read on this website. If you want to continue trading on shorter time frames, go ahead, but I know one day you will come to conclusion that shorter time frames don’t work and you will either move to higher time frames or give up on trading after losing a lot of money.
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