One of the main advantages of Pocket Option is the simplicity of opening a trading position: one only needs to anticipate whether the price is going upwards or downwards and choose the right amount to trade. It is also possible to set the duration of each position to different time frames, and make them as short as 5 seconds! But is it a good idea to trade within such short periods? Let’s have a closer look at what trading different time frames implies.
It can be quite tempting for traders to open positions with very short time frames, thinking that fast-moving charts provide more opportunities for gains. Shorter time frames can indeed give a chance of trading and making returns faster, but only when predictions about price direction turn out to be correct. Traders who place such quick trades can incur losses equally fast and run out of funds earlier than expected. Why does it happen?
It is not surprising that lower time frames lead to more frequent losses. To a large extent, this is because the quality of trading signals deteriorates greatly; spotting an accurate trade set-up quickly may become a real struggle. It is quite difficult to predict where the price of the asset will end up upon expiration.
Consider the following chart for EUR/GBP currency pair with a chart period set to 1 minute. Let’s have a look at the difference between the support level of 0.84150 and the closing price of the last bullish bar is at 0.84171. The price changed by an amount of 0.00021 within a minute. This means that if you placed a one-minute trade, you had to anticipate price changes within a fluctuation of 0.00021 and sometimes even smaller!
By entering trades with lower time frames you need to estimate tiny price fluctuations to have an idea of where the price would end up once your positions expire. A longer trade period would make price anticipation a little easier by providing a clearer idea of the trend’s direction. Also, price fluctuations tend to be bigger over extended periods.
Longer time frames
As a beginner, you might consider trading within time frames of 5 minutes or longer. The length of a time frame also relates to the interval of the candles (or bars) on the chart. For example, if the interval on the candle chart is set to 1 minute, it makes sense to set the trading interval to 5 minutes or so. By the same logic, for 5-minute candles, you might consider time frames of 15 minutes. You can select the time frames of candles on Pocket Option under the chart type section:
In longer time frames, the price action tends to be more clear and regular. The reliability of price signals tends to improve and one has time to analyze overall trends. Higher time frames are more likely to involve larger price fluctuations that can be easier to predict. Also, sudden news that affects assets you trade could lead to price levels changing in mere seconds and cause a loss in a short time frame, as lower time frames are subject to high volatility and event day risks. In longer time frames, this could hardly be noticeable: higher time frames filter out ‘market noise’, – very small price fluctuation that can be critical in shorter frames.
To be more clear, consider the example of the AUD/JPY currency pair below:
There appears to be an uptrend developing, yet there are also points of consolidation, with several red (bearish) candles in between green (bullish) ones. If a one-minute trade had been opened and coincided with such an unexpected consolidation, there could be potential losses. The outcome of a trade within a longer time frame is less likely to be affected by such temporary corrections as its focus would be the overall uptrend.
Another good reason for trading longer time frames is the fact that it reduces psychological pressure and gives you enough time to analyze and monitor positions. You do not have to be watching changes that happen every second.
Trading short time frames
Is it ever a good idea to trade short time frames? As already mentioned, short frames can be challenging when you are trying to anticipate a price direction. They need lots of skills to correctly spot a trade setup and require you to watch the asset and the market very closely. Certainly, this can be very challenging in the beginning and cause impulsive decision-making.
However, there are still cases when you can trade shorter time frames, specifically when there are clear trends in the market. If there is a clear uptrend, you will likely see long bullish bars/candlesticks on the chart and set up a trade with a lower time frame. This could be suitable for experienced fast-thinkers. Remember that this kind of trading requires the ability to react quickly and there may be dangerous periods of price consolidation as previously mentioned. You might also consider using some technical indicators in addition to the basic support and resistance levels and implementing various risk controls. In any case, do not hesitate to practice using different time frames on a Pocket Option Demo account before risking real capital. This option also allows you to practice different strategies and use various trading tools, charts, and trade time frames without exposing your real funds.
Certainly, there is no one-fit-all rule for choosing a time frame. In this article, we have seen that trading short frames is challenging and can be quite risky, even for experienced traders. Despite providing potential opportunities, there are also many risks and false signals that can lead to losses. It may be a good idea to start trading with longer time frames in the begging and practice sufficiently on Pocket Option Demo account. Best of luck and enjoy Pocket Option!
Risk Warning: The trading products offered by the companies listed on this website carry a high level of risk and can result in the loss of all your funds. You should never trade money that you cannot afford to lose.