I copied this from a website explaining which time frame to use.
Profit goals
The smaller the time frame the smaller the profit goals set by traders for each trade. E.g. while on 5 minute charts Forex traders would see reasonable targets at the next support/resistance level 15-30 pips away from the entry point, on the daily time frame profit goals will be extended several days into the future with expectations of banking 200-400 or more pips in one trade.
A trader can make same 200-400 pips trading 5 min time frame, but it would require a lot of trades to be taken, hours of price monitoring, which is not an easy task.
[I]What he’s saying is the amount of Pips taken is what matter… Well isn’t this total BS? 30 pips can bring the same profits as 400 pips depending on what lot size you take. And if risking only say 3% on “any” trade, pips mean nothing.[/I]
Hourly charts have wider price ranges and therefore require wider stops to be placed, and in case of being wrong on a trade, larger losses to be taken.
[I]Again… A wider SL means nothing if risking the same %. Am i missing something?[/I]
If to speak about daily charts, losses there if occur are even larger as the market requires wider space to swing the price.
[I]Again…[/I]
So here you have: smaller profit targets and smaller losses or larger profit targets and larger risks.
[I]his summary[/I]
Now please tell me if I hae this all wrong.
Example senario
I choose to trade on the daily. I find an entry
Account size = £2000
Risk 3% = £60
Required SL = 100
Risk Reward = 4:1
PIP value = £1.60
Succeed with this trade.
[U]Profit = £240[/U]
I then choose to trade on the 5min
Account size = £2000
Risk 3% = £60
Required SL = 10
Risk Reward = 4:1
PIP Value = £6
Succeed with this trade
[U]Profit = £240[/U]
So I dont understand what this guy was saying at all.
But the reason im even bothered if because I wanted to trade on the daily. But while backtesting I did a trade, the swing up too 3 months and I had a SL of 200 and made 4:1. My profit was £240 over 3 months !!! This can be done sooooo much quicker by trading smaller time frames…
What should I do… I have a full time job.
Note - I do understand that profits on higher TF’s will be more if you can keep the SL minimal. But surely this is not wise. I have learnt to first look at what SL is needed then go from there. If a 100 pip SL is needed then thats what you should put. As far as I can see, the ONLY way to increase profits to make up for the long waits on higher Time frames is to reduce the SL. I don’t no what to do about it. Maybe I should trade the 4 hr instead of daily. Should be manageable witha full time job still.
thanks