Considering the speed at which scalping takes place, a key question that many traders ask themselves when looking to attempt this style of trading is what time frame is most ideal to achieve the best results. Unfortunately though, there is no one clear cut answer that will provide you the key to mastering scalping. There are however some factors you should consider when attempting scalping that might help you understand what time frame works best for you.
Importance of choosing the right time frame
Firstly, it is imperative to understand that deciding what time frame to use should neither consume you nor deter you from scalping. In fact, it is not advisable to spend too much time choosing a time frame in the first place. The idea behind this is essentially that the time frame you have chosen should not impact your overall profitability on a large scale. Considering the greatest impact on the success rate of your operations comes from your strategy and execution, if it is working well on one time frame, chances are it will work on most others. If this is not the case, perhaps revising your strategy might be the most advisable first step.
Understanding your goals and how to attain them
Once you’ve got a sound strategy to work with and are ready to jump into scalping, there are two facets that may help you reach a conclusion on the right time frame for you; the amount of operations you plan on executing and the gains you are looking to achieve per operation.
As a general rule, the more trades you plan on making in a given trading day, the shorter you can scale down your time frame. Conversely, if you only plan on executing one or two trades per day for example, utilizing a slightly longer time frame— perhaps around 15 minutes –will likely suffice. To provide some context on the world of professional trading, the average time frame used by professional traders normally varies between the 1 and 15 minute marks. Now, keep in mind that this is a general rule and that adjustments can certainly be made according to your approach and overall goal.
Next, you will need to consider what level of return you expect to achieve from each of the orders you execute, which will of course correlate strongly with the level of volatility of your chosen asset. Volatility is always important when it comes to scalping and can influence the outcome of your operations greatly. Upon assessing the movement of the graph and the level of volatility present, you should decide what amount of pips gained would be a reasonable quantity to strive for. Again, in terms of professional trading, the average amount professional traders aim for tends to be within a range of 5-10 pips per trade.
This is also where a consciousness of the equilibrium between amount of operations and individual gains comes into play. Depending on your goals, strategies used and level of risk aversion, you should be able to plan in a way that these two factors complement one another. Starting out slow and on a small scale may be a good idea for the start, and over time you will be able to expand on your thresholds in order to allow for higher profitability overall.
External influences to consider
If you are at all familiar with Isaac Newton, you probably know that with every action comes an equal and opposite reaction. While stock markets themselves do not necessarily follow Newton’s laws of motion, the actions we take when using the trading platform can potentially cause a strong reaction in opposition to our goals.
The primary example of this is winding down the time frame. While it is true that scaling down to shorter time frames can allow you to see things you may not have otherwise and can be an asset in executing many operations in a day, it certainly does not come free of consequence.
To expand on this idea, let’s first consider the importance of speed and time in regards to scalping. Quick execution is always imperative when it comes to trading, and the lower the scale with which you are working, the higher that execution speed needs to be to compensate. If you are working on a 1 minute scale for example, the time at which you execute an order in accompaniment to the time it takes for that order to be processed can make or break the outcome of the trade. This means that not only do you need to have much higher focus and discipline when operating on smaller time frames, but also that the platform and broker you are working with need to be up to the same standards. At this point it is important to note that your specific choice of broker could even cause you further problems as there are quite a few that are not too keen on scalping and as such set parameters or minimum time limits for durations of individual trades.
Yes, speed is important and yes, smaller time frames can be great for maximizing the amount of trades you can accomplish throughout a given trading day, but it is always crucial to understand the trade-offs. Always keep in mind that your goal for pips attained per trade will ultimately be the determining factor in how you set your scale and that the lower you scale down, the higher the importance becomes on focus, speed and especially the level of volatility in the market. Remember as well that working at greater speed allows you much less time to think, which contributes greatly to the almost systematic nature of scalping. This is not to say that scalping is impossible, but rather that it is encouraged to start out slowly and practice consistently in order to get a feel for how it works and what time frame best suits you. Happy scalping!