This is a concept that took me awhile to understand, but I feel that it is very important, so I hope that you get some amazing insights out of this exercise.
One of the biggest things that you have to figure out on your trading journey is your Trading Timeframe Personality (TTP).
I fought this for awhile and I struggled. But once I started working with my personality, things became much easier.
I'm not saying that this is the only thing that you should pay attention to in your trading education, but it is one of the big pieces. So if you haven't found your TTP yet, you need to do this exercise.
Be sure to have your notebook handy and write down your questions, ideas and answers.
What is a Trading Timeframe Personality (TTP)?
It is simply the timeframe that you feel most comfortable trading on.
If you are comfortable trading on that timeframe, you give yourself a much greater chance of success.
There are only two factors that must be taken into consideration when figuring out your TTP:
- Your daily schedule
- Your unique personality and attention span
Many times, we only take one factor into account when choosing an education program or trading method. To get the best results, and to reduce your frustration, you need to consider both.
Your Current Schedule
If you don't have a lot of time to trade, then being a scalper on a 1 minute chart might not be the best thing for you. This is certainly the case if you have a demanding day job or you have a lot of family obligations.
I know that this sounds obvious, but I have been guilty of this myself and I have seen others make this same mistake. It is easy to be attracted to the excitement of daytrading when you really should be focusing on longer timeframes.
On the other hand, if you have the time to daytrade, it is something you should try out.
You might be good at it. Swing trading might not be your thing and that is why you are losing money.
How to Figure it Out
Let's start with where you are now. Sit down and ask yourself two simple questions:
- How many hours a week can I realistically commit to trading?
- Can my dedicated trading time be set or does it have to be variable? For example, can I trade only between 1pm and 5pm? Or do I have four total hours to trade, spread out over the course of the day?
Be honest with yourself.
When considering your answers, take into account obligations such as your family, your work and time for leisure activities.
I would also subtract 30% from any hourly number you come up with. For example, if you think that you have 20 variable hours to trade a week, subtract 30% or 6 hours.
Assume that you only have 14 hours to trade. This is because we tend to overestimate what we can accomplish in a day.
Then take a look at which forex markets are open during the time you have to trade. This mostly applies if you have set hours to trade.
If you are only available during low activity times, you may want to trade on a longer time frame. Having the London or New York sessions available for set, short-term trading hours is ideal.
If you don't know when certain markets are open in your timezone, then use this tool.
Write down your answers to this exercise in your notebook right now.
Now, let's talk about your personality and attention span. Think back to when you were in school…
Were you able to study for long periods of time, or did you have trouble? Do you prefer instant gratification, or are you willing to wait a little?
This can give you insight into which timeframe(s) you should be trading on.
How to Figure it Out
Ideas to consider:
- Do you prefer to see things to completion every day? – If yes, you might be a better day trader or scalper.
- Are you willing to wait a few days or even weeks to see your trades play out? Maybe you like to be able to enter your positions even if you are a little late to the charts? – If yes, you might be suited to swing trading.
- Do you prefer to check your trades once a days or even just once a week? – If yes, then position trading might be your best bet.
Really think about your personality and how you react when you are in trades. One timeframe won't necessarily make more money than another, so don't let that factor into your decision.
You might also consider taking some online personality tests for traders. Never trust any canned test 100%.
But if they are all telling you a similar thing, then you should probably give it more consideration. Here are a few to get you started:
Now Do Some Testing in a Demo Account
Open a demo account at your favorite broker to test different timeframes. I would recommend testing them all at the same time, to get to your answer quickly.
The trading method doesn't really matter for this test. You could use technical analysis, fundamental analysis or astrology.
You are only testing for timeframe right now.
Do it for about a month and see what happens. Remember to keep a trading journal to see which timeframe is working the best for you.
- Daytrading or Scalping (1 hour chart or below)
- Swing Trading (between 4 hour and daily charts)
- Position Trading (between the weekly and monthly charts)
What did you notice?
Pay particular attention to:
- On what timeframe did you miss trades?
- Was one timeframe noticeably easier to trade on?
- Where you tempted to mess with open trades on a certain timeframe?
- Which timeframe did you lose the most money on?
- Did you find yourself getting anxious on any one timeframe?
- Where you up at night thinking about a trade? That might not be the best timeframe to trade on.
- Did you overtrade on a certain timeframe?
- Was your life getting in the way with certain timeframes?
- And more…
At the end of this exercise you should have your answer. Even if you aren't 100% sold on the result, just stick with it.
This will keep you from bouncing back and forth between timeframes and system. I call this the Trading Silodrome.
It sucks…I've been there.
So commit and move forward, even if you don't think it's ideal. Now you know how to choose the education you get in the future.
Will Your TTP Stay the Same?
Remember that you also aren't married to this timeframe.
Your schedule and trading personality might change, so you might also need to change your timeframe, or add new timeframes (oh yeah!). For example, let's say that you are able to quit your day job and start trading for a living.
You could then move from the daily charts down to lower timeframes and see if there are patterns that you can exploit for profit.
But you need to start from where you are and commit to learning one thing well.
I can't stress this enough.
True, you might have what it takes to be a badass daytrader. But if you work a demanding day job, then your trading will be shit. So maybe you have to step back a little and trade the 4 hour charts, with similar patterns.
Knowing that you can evolve later, might also alleviate some pressure around choosing the “perfect” timeframe right now.
My personal experience has taught me that my TTP is primarily swing trading, which is mostly on the 4 hour and daily charts.
It gives me time to see a trade and react.
I generally don't have the patience to sit around and scalp. I also find that I get antsy when I position trade on the weekly charts and I find myself wanting to adjust positions or take swing trades around the position.
The bottom line is that you need to experiment for yourself and see what works for you.
Now get to work.
What is your Trading Timeframe Personality and how did you figure it out? Leave a comment and let us know…