The most common question I hear when trading CFDs is what is the best time to day trade CFDs. Today we will look at the three most important factors to consider when looking for the ideal time frame for CFD trading.
- What size of winnings compared to your losses are you looking for?
2.Always use three different time frames for safe trading
- Share CFDs against Forex or Index CFDs. Different time frames should be considered
What size of winnings compared to your losses are you looking for?
One of the most important and overlooked components of trading success is determining the appropriate win:loss ratio or what some people call the risk:reward ratio. Every trader needs to get the idea firmly fixed in his head about how important it is to find day trading opportunities where the probability of reward is 1.5-2 times greater than the amount of risk.
Keeping this ratio firmly in your mind will ensure that you find high probability opportunities and completely ignore the need to trade just for the sake of trading. Trading for the sake of trading not only wastes your valuable time and money, but can erode your confidence level to the point where you are hesitant or unwilling to move on to any other trade. In light of this, you want to choose a time frame that will give you ample opportunity to profit after your setup is established.
Using three different time frames to locate high probability day trades
For day traders, it is very important to have a success rate or winning probability of more than 60%. This occurs as a result of trading for a short period of time, which reduces the probability of emerging winners. In order to locate high-probability setups that will win more than 60% of the time, it is best to identify short, medium, and long-term time frames to increase the odds in your favor.
If you are trading using the 30-minute chart, it is best to trade in the direction of the trend and have the five-minute chart and the one-hour chart in the same direction as your 30-minute chart. The five-minute chart will identify an early setup, the hourly chart will make sure you’re trading the most dominant trend, and you can use the 30-minute chart to time your entry. A combination of three different time frames will greatly increase the chances of day trading success.
Day trading Stock CFDs vs Forex or Index CFDs. What are the time frames to consider
Depending on the type of CFD broker you use and the charts they give you access to, you will find that the best time to day trade stock CFDs is to use the one minute chart for the first 35-40 minutes, then switch to the two-minute chart for the next two hours and move to the close using the five-minute chart. When trading Forex or Index CFDs, you’ll find ample opportunity and liquidity using anything from one-minute to hourly charts.