Lower Time Frames May Cause Over Trading

Traders can get caught up in thinking that shorter time frames can reduce risk. They think they can get out of bad trades sooner but they also get out of good trades sooner.

If a trader is looking at the smaller time frames like the 1- and 5- minute they will get more signals. They will be getting in and out of the market more often because the smaller move seem to be important but in the big picture they are not. If you look at the smaller time frames you may get 10 to 12 signals a day while on a 1-hour time frame you might only get 1 or 2 a day. By trading the larger time frame will find that you will not get whipsawed as much and you will not have to spend as much time in front of the computer. This will reduce your emotion and you will find that you will make better trading decisions. You will not be trying to over think the trade. You will just see a signal and take.

The following chart is 7 hours on a five-minute chart; you would have made about 180 pips if you had taken each of these signals. Over the course of the 24 hours you could have made about the same Number of pips as the following chart on the one hour but you would have to be in front of the computer for the 24 hours and this can get old fast. You get caught up in one of the health issues you should try and avoid, being overly tired. Then you start to second guess yourself and make mistakes. We can assure you that you would have missed some of the moves causing your self more frustration and emotion.



This is a 1-hour chart for 2 days; if you had taken the two trades on the first day you would have made over 400 pips.

You would also be rested and alert for more trades on other currency pairs which in turn would make you even more pips.