A new trader always wonders which time frame (Lower Time Frame or high time frame) would serve him the best. As there are many different trading styles such as from scalping to positional trading, so are different trading strategies to opt for.
Therefore, to get high gains from trading, you should first understand and look for the best time frame that may suit your trading skill, loss tolerance, and financial circumstances. Let’s learn about the time frames to choose the most suitable one.
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What is the Lower Time Frame in Trading?
The LowerTime Frames consist of any duration of time frames less than 1 hour. Scalpers or Day Traders love to trade on LTF to benefit from the short-term price movements in the market trading hours. Additionally, the lower the time frame, the shorter the trade duration, giving a chance to do as many trades per day as possible. But there can be some exceptions to this general rule of thumb.
However, trading in lower time frames can be risky for beginners. Lower time frames are designed to face fast movements of price action, which makes a trade challenging.
Potential Disadvantages of Lower Time Frame
When you trade on lower time frames, it ensures a large no of trades. Remember, LTF always has significant risks associated with it. Check out below:
- Fewer Wins & More Frequent Losses
- Event Day Risks
- Psychological Effect
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Time Frame differences between HTF & LTF
The trading skill and the time frame both play a vital role in making a trade successful. Let’s recap the time frames critically. The HTF and LTF time frames have identical design infrastructure but serve in a little bit different ways. The key difference between them is a different calibration for both time frames.
Being specific on the Higher Time Frames (HTF), it is designed and calibrated for any duration of more than 4 hours. We recommend using HTF on Monthly, Weekly, Daily, and lastly, the 4-hour time frames for optimum accuracy.
On the other hand, trading on lower time frames is designed and calibrated for the durations of 1h, 30m, 15m, and 5m time frames in most of the cases.
- Higher Time Frame (HTF) gives maximum accuracy on weekly, daily, and 4-hour time frames.
- Lower Time Frame (LTF) serves best on 4hr, 1hr, 30m, 15m, and 5m
Pros and Cons of Lower Time Frames (LTF)
Pros :
- A lot of trading opportunities
- Trading on LTF can be exciting and fast-paced
- A stronghold on stop loss orders, leading to limited potential losses
Cons:
- LTF seems to be more volatile and noisy, so, it’s harder to identify long-term trends and resistance levels
- Trading on lower timeframes needs constant monitoring of trades and accordingly dealing with the market changes
- Being shorter periods, LTFs can be more prone to false signals and price fluctuations, so it’s difficult to build a reliable trading strategy
After all, choosing a timeframe depends on the trading style, preferences, and goals of a trader. Consider the pros and cons of each timeframe you should look for the option that best suits your trading strategy and risk tolerance.
Conclusion
Every individual is unique and so has a different trading strategy. Lower time frame charts may be suitable for some traders while others may opt for the higher time frame charts. However, they both have their pros and cons. According to my trading experience, it’s mostly good to trade on higher time frames.
Lower time frames, although associated with high risks, have a slight edge in frequent trading opportunities over HTF. However, LTF is not recommended for new traders or beginners in trading.
Higher Time Frames ensure easy price action analysis at a longer period to make informed trading decisions, but it needs a lot of patience. In summary, only patience can turn you into a good trader.
