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News & Analysis

Avoiding three pitfalls of shorter timeframe online trading

14 October 2019 By Mike Smith

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The relative ease of online trading today has not only increased the opportunity of access but flexibility to trade different time frames that can better “fit” around other things going on in life.

Trading short timeframes is a popular choice for many online trading strategies. Indeed, the shorter time-frame charts e.g. 15 minutes or less, are often peddled by so called trading gurus as the optimum way to trade index/commodity CFDs and Forex online.

However, in reality many short timeframe traders fail to achieve desired outcomes with many suggesting that those trading longer timeframes may do better.

Obviously, whatever trading time-frame you choose is the right one for you (often dictated by lifestyle) but it does raise the question as to whether it is the timeframe itself or are there issues associated with short term trading that are the challenge.

In this article we suggest three of the apparently common potential challenges (or “pitfalls” as we have chosen to call them) to facilitate awareness, if indeed trading shorter term charts is your online trading choice.

1 – Choice of time to trade

Commonly, many shorter time-frame traders plan to ring-fence screen time, for example an hour per day, to execute their trading actions. We know that there are times when markets are more likely to move (consistent with the release of economic data, and opening of the larger exchanges. Hence, if you are to ringfence time, logically this ideally should be consistent with such periods where changes are market sentiment are more acute.

So, challenge one is ensuring that you choose the right times for your “ring-fencing” whenever you choose to switch on your PC and delve into the online trading world.

If we do not strive to make this happen, the lack of more obvious trading opportunities can often create an emotional response of desperation and urgency to find a trade that may work. Often resulting in trying to ‘force a trade’, or ‘talking yourself into a trade’ where perhaps no opportunity exists technically, these will rarely result in a positive outcome.

2 – The ‘thrill of the chase’

Trading short timeframes is often seen as being exciting. The idea of challenging the market “big boys” may appeal to some, but from a motivational point of view, it is questionable if this is the right mindset to come in with into the online trading arena.

Such excitement can be a highly charged emotional state, and although we have written before about the place for channelled and controlled emotions in trading, equally when things are not going well with a trade, decisions are likely to be made from this high emotional state, in this case becoming potentially destructive.

Listen to your internal ‘language’ both when trades go for and against you, and make a judgement call as to whether this may be creeping up on you as a potential issue.

After all, you are trading to make profit not to be “excited”, and logically ‘in the cold light of day’ know that a heightened emotional state is not the place to make consistently good trading decisions.

3 – “Sucked” into price movements

Watching that profit/loss column go up and down can be almost hypnotic in nature, It is easy to get sucked in to watching price movements continuously. With money being for many an emotive topic, seeing movements up and down again may evoke emotional decision making.

This “sucked in by price” scenario can take over from following your trading system and CHART price action, which is the place from which decisions should be made.

If this resonates the solution is simple. Right click in the “toolbox” (or terminal on MT4) area and remove ‘profit’ from the columns that you can see.

So there is our top three for any of you endeavouring to improve outcomes from your online Forex trading, and online CFD trading, and what may be causative factors if shorter timeframes are failing to deliver the results that you had hope for.

With such awareness, if any of these resonate with you, you have:

  1. The start point to begin to take actions to address any of these.
  2. Perhaps justification for looking at alternatives.

Disclaimer: Articles are from GO Markets analysts and contributors and are based on their independent analysis or personal experiences. Views, opinions or trading styles expressed are their own, and should not be taken as either representative of or shared by GO Markets. Advice, if any, is of a ‘general’ nature and not based on your personal objectives, financial situation or needs. Consider how appropriate the advice, if any, is to your objectives, financial situation and needs, before acting on the advice. If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.

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