A fundamental skill that all Forex traders want to develop (newbies and veterans alike) is the ability to do solid timeframe analysis. Learning the ins and outs of analyzing charts and coming up with effective strategies to anticipate how the market is going to behave within a certain block of time is a major piece of the Forex success puzzle.
No, it isn’t a “magic bullet” that will funnel mountains of money into your bank account on autopilot. But it is going to help you make a whole lot more money – and protect those profits – than if you just sort of flew by the seat of your pants. With that being said, what is the best timeframe for forex swing traders?
The best time frame for swing traders to use is the Daily time frame. The daily chart, in conjunction with the weekly and monthly will provide a clear picture of the direction of the forex markets. Most swing traders use the 1 Day time frame for analysis and direction, then the 4 Hour charts for entries.
What Time Frame Is Best For Forex Swing Trading?
Time frames in the world of Forex trading generally break down into all designated units of time when most trading activity takes place.
Sometimes time frames are broken down by minute to minute activity, hour to hour, day-to-day, or even week to week. Choosing the timeframe that makes the most sense for your strategies and your research is critically important.
What time frame is best for Forex swing trading?
Well, if you’re going to be doing swing trading you’re going to want to look at larger and longer time frames. This is going to help you break down patterns and trends that are actually breaking out much more effectively.
Time frames for swing trading generally stretch out across a couple of days (at the very least) but can also go out a couple of weeks or even a few months to a year or so.
Swing traders will also usually take advantage of stop loss and profit targets to pull out gains and protect their profits. Sometimes, though, they are going to move on price action and other technical indicators and sort of strike while the iron is hot.
It really all comes down to your specific trade strategy and how you hope to make money in these markets.
Swing traders are looking to capitalize on overall price movement averages by focusing on the macro movement more than anything else. This helps them choose a smarter entry point and then they have plenty of options to exit while still pulling profits with them on the way out.
If you are going to go down this road, though, make sure that you are swing trading on less volatile currency pairs.
High volatility pairs are a lot less predictable and a lot less consistent.
Sure, they have homerun potential – but they require a different strategy for success.
The Pros and Cons of Using the Daily Chart for Swing Trading Forex
Now that we’ve gone over what time frame is best for Forex swing trading it’s important to highlight the advantages and disadvantages of making these kinds of trades in the first place.
On the plus side of things, swing trading doesn’t lock you into extremely long time commitments on your positions.
Swing trading is mostly handled on a day-to-day time frame. You’re able to pop in and pop out, only spending a couple of minutes at the end of the trading day to break down your market analysis.
Swing trading is also purpose built for part-time Forex investors. You’ll be a little bit busier than long-term buy and hold kind of traders, but you can decide when you pop in and pop out.
It’s not hard to build up the confidence you need to succeed in the world of Forex with this kind of trading with training wheels, so to speak.
Of course, this type of trading can be wildly profitable if you are making smart trades and covering your risk.
Consistent implementation of your strategy can help produce returns of anywhere between 10% and 50% per annum with swing trades alone. That’s nothing to shake a stick at!
Best of all, you’re not going to be tying down your nest egg for extended amounts of time.
As we highlighted above, swing trades really do have you getting in and getting out rather quickly.
This is not to suggest that swing trades are without their flaws and without their risks.
For one thing, you’re going to see a lot more exposure to both overnight and weekend price gapping. This can prove to be disastrous if you’re not leveraging smart risk management.
Secondly, you could have a tough time “timing the market” with swing trades. Beginning Forex investors that don’t have the gut instincts for this kind of investment are usually hardest hit in this department.
Lastly, swing trades can get pretty expensive.
You’ll not be spending the same kind of money that day traders are – but you’re going to be spending a whole lot more than buy and hold investors are, that’s for sure.
Using Multiple Time Frames for Swing Trading
There’s no real reason to lock yourself into just a single time frame, or even a couple of time frames when trading Forex.
Daily charts, weekly charts, and 4H charts can all give you individual insights into how Forex markets are behaving – insights that you won’t be able to get with one type of analysis or timeframe on its own.
A lot of swing traders like to pay attention to multiple different time frames to get a real feel for how the market is behaving.
Longer-term time frames give you more historic movement details whereas short-term time frames let you better time the market and get a feel for how it’s acting right now. Combine both of these viewpoints together and you’ll be able to build a much more complete picture of what’s happening.
That means much more confident trades, much more profitable trades, and a more effective strategy to protect against risk when you are swing trading in the Forex markets.
I’d highly recommend that swing traders use a trading platform like Tradingview. This new generation of customisable charting platforms are making it much easier to keep an eye on the markets, than using the generic MetaTrader 4 that all brokers are offering!
In Summary – What Time Frame Is Best For Forex Swing Trading?
In conclusion, the daily charts are the best for swing traders because of how smooth the moves really are. If you’re purely using the 4H time frame for your swing trading, they are too choppy and you can easily get caught on the wrong side of the market.
Weekly charts should only be used if you’re looking for a long-term hold or are using other time frames in conjunction with it to get a more complete view of the market.
However, it’s important to be aware of the risks involved in swing trading, as well as using multiple time frames to get a better understanding of market dynamics.
What time frames do you use for swing trading? Let me know in the comments down below.