The most common question I hear around trading Contracts for Difference is what is the best time frame when day trading CFDs. Today we’ll have a look at the three most important factors to consider when finding your ideal time frame to trade CFDs.
1.What size wins compared to your losses are you after?
2.Always use three different time frames to trade safely
3.Share CFDs versus Forex or index CFDs. The Various time frames to consider
What size wins compared to your losses are you after?
One of the most critical and overlooked component to day trading success is identifying the appropriate win:loss ratio or what some people refer to as risk:reward ratio. Every day trader needs to have the idea firmly planted in their mind of how important it is to locate day trading opportunities where the chance of reward is the least 1.5 to 2 times the size of their risk.
By keeping this ratio firmly planted in your mind it will ensure you locate high probability opportunities and totally disregard the need to trade just for the sake of trading. Trading for the sake of trading not only loses you valuable time and money it can drain your confidence level to the extent that you hesitate or are reluctant to jump on any other trade. In light of this you want to select the time frame that gives you ample opportunity for profit once your setup has been established.
Using three different time frames to locate high probability day trades
It is vital for day traders to have a success ratio or the probability of winning in excess of 60%. This comes as a result of trading over a short time frame thus reducing the chance of letting winners run. In order to locate high probability set-ups that win more than 60% of the time you would be best to identify short term, medium-term and long-term time frames to put the chance of success in your favour.
If you trade using a 30 minute chart you would be best trading in the direction of the trend and having the five minute chart and one hour chart trending in the same direction as your 30 minute chart. The five minute chart will identify the early set up, the hourly chart will ensure you are trading with the most dominant trend and you can use the 30 minute chart to time your entry. The combination of three different time frames will put the odds of day trading success greatly in your favour.
Day Trading Share CFDs versus Forex or index CFDs. What time frames to consider
Depending on the type of CFD broker you use and the charts they give you access to, you will find the best time frame for day trading share CFDs is to use the one minute chart for the first 35 to 40 minutes, then move to the two-minute chart over the next two hours and move into the close using a five minute chart. When trading Forex or index CFDs you will find ample opportunity and liquidity using anything from a one minute chart up to the one hour chart.