Switching between different forex trading time frames has a number of advantages. These become apparent when viewing forex vs stocks. due to the sheer liquidity of the forex market, traders can view very short times frames and observe meaningful information whereas, a similar time frame for an illiquid stock may not present any new data points if the price has not changed
Another advantages in favor of forex time frame includes the 24hr nature of the forex market during the week. Switching between Mutiple forex time frames during difference trading sessions(Asian,European,US,Japan) presents traders with different market conditions that are characteristic to that trading session like ranging markets during the Asia session or trending markets during the European and us session cross over. Traders can capitalize on these different market characteristics by using various time frames to spot ideal entries.
Often, Traders can get conflicting views of a currency pair by examine different time frames. For example, while the daily chart might be showing a up-trend the hourly chart can be showing a down trend. but which way should it be traded ?
This confusion can produce counter production unrest in the traders mind when attempting to line up trades. therefore its important for traders to plan the time frames they wish to trade. therefore its important for traders to plan the time frames they wish to trade in accordance with their trading strategy.
Swing Trade Example:-
A swing traders adhering to a trend following strategy should avoid making rash decisions when viewing price movements on smaller time frame charts traders may oserve what look like a trend reversal on a shorter time frame chart. however, after viewing the daily chart, it is clear to see the trend is still well intact
Four-hour EUR-USD chart providing misleading signals suggesting a trend reversal :
Incorporating a longer time frame allows traders to see a bigger picture of the currency pair, to get an idea of general trends, or the sentiment that may exist, while the shorter time frame chart can be used for timing entries into the markets.
therefore, looking at the daily chart, it is clear to see that the downtrend is clearly still in force when observing the correct time frame.
Daily Eur/USD Chart : Showing a clear trend continuation lower:
Traders should adopt Multiple time frame analysis to incorporate as much information as possible not the analysis - without overcomplicating the analysis.
The beauty to achieve greater conviction for the trade.