Hello and Welcome to the ditto educational series that will provide you with the skills you need to become a forex trader!
Today we are talking about Time frames and trading windows, now these two subjects are not specifically linked but they are two good subjects that we can look at in this one video.
As far as time frames go people are sometimes unsure which they should be trading and why, Let’s look at 3 different types of traders and the the time periods they may use. Basically you will either be trading on a short, medium or long term basis depending on your strategy and preferences. There is no absolute definition surrounding which time frames will be used for each as everybody is different. this can cause confusion for new traders when they are asking themselves which time frame do they start developing or applying a strategy in.
If a trader is using a strategy that has a relatively short holding period such as a day trader, Then their positions will be closed out before the end of the day or perhaps even by the end of a particular trading session. This differs from the strategies of trend and swing traders greatly.
In reference to long, medium and short time frames. A swing trader, trend trader and day trader would have different definitions of how long those periods would be. For the day trader his or her long term trades could last from several hours to the entire day. Where as the swing and trend traders idea of long term trades could range from months to even years.
This is why it can be difficult to pin down exactly what timeframe to use for your strategy. People all have different opinions within their own categories about what you should be doing but there is one overall sentiment that remains the same.
How ever you trade you are going to need to look at the bigger picture first then move to a lower time frame to analyse the market in more depth secondarily. Traders tend to want to trade with the over all flow of the market and not against it, you may have heard the phrase the trend is your friend and that is what it is referencing to.
Traders can look to the larger timeframes such as the daily and weekly charts to establish overall trend and perhaps even prominent support and resistance areas in the market, then they can begin analysing the lower time frames for opportunity to place our trades perhaps based on retracements or other analysis but that is not the subject of this video.
In summary! The time frames you end up using will be depend on what type of trader you would like to be and how you analyse the market. Those two factors will decide for you eventually as you get to grips with a trading plan that suits your lifestyle.
The forex market can be broken up into four major trading sessions: the Sydney session, the Tokyo session, the London session and the New York session.
The open and closing times are loosely based on local business hours with some variations through the year depending on daylight savings and other seasonal factors.
You should be aware that at some times sessions over lap each other and this overlap allows for a greater increase in trading volume and opportunity for us in terms of market movement.
For example During the summer, from 3:00-4:00 AM Eastern Time , the Tokyo session and London session overlap, and during both summer and winter from 8:00 AM-12:00 PM Eastern Time , the London session and the New York session overlap.
For some traders that thrive during these hours of increased price movement it can be important to track the sessions and clear their schedules so they are available and trading during these times. The overlaps can be optimum conditions for day traders and scalpers alike. There are obviously quieter periods during the overlaps but when trading the major pairs there is always opportunity to be had.
To summarise this subject let’s look at the best and worst times to trade.
The best times to trade are.
- When two sessions are overlapping, we can make use of the increased liquidity and larger market movements.
- On average The European session tend to be the busiest based on previous historical data.
- The middle of the week usually has the most market movement, as the pip range widens for most of the major currency pairs.
The worst times to trade are.
- Sundays – when markets open everyone is asleep and liquidity is low due to lack of trades being placed.
- Fridays – liquidity dies out during the latter part of the u.s session
- Holidays – everybody is taking a break, spreads widen and markets are at a stand still.
- Major news events – generally speaking these are avoided due to unpredictable movements.
When deciding if you are going to be a session trader you should back test your strategies using a demo account to ensure that is right for you. Never trade live unless you know what exactly you are getting into.
I hope you enjoyed today’s video ladies and gentlemen please sit back and contemplate what you have learned as always contemplation is the key to learning.