There is a relationship between you as a trader, your trading plan, your trading methodology, and the amount of time all of these variables need to either confirm or deny that an opportunity for a profit exists. Not all methods will work under all time frames and if you personally don't know your own decision-making process very well, you might be tempted to work with a system that is not compatible with your natural time frame.
Everyone has a natural time frame in which they function best. By "natural time frame" I mean the amount of time required for you personally to reach a conclusion and then act on it. You cannot participate in
the markets without reaching some sort of conclusion that prices are too high or too low relative to some other price that the market will eventually reach, assuming that your hypothesis is the right one. After
you reach that conclusion, you then act on it. Depending on your personal temperament, your tolerance for risk, your previous success or failure, your education, and so on, the amount of time you need personally might vary, and this is what gives rise to the multitude of different trading approaches.
What is not immediately apparent to most traders is that what sounds good or makes sense initially when trying to create a market presence may not be compatible with their natural time frame. If this kind of conflict develops, then following the rules of the system will be difficult, as will trying to create a trading plan, because those things are not in harmony with the unique person of the individual trader.
The first step in selecting a methodology that will be best for you and
in learning to best apply the rules is to select a trading time frame compatible with your character. If you are someone who likes to think things through from many different angles and then sleep on it before making a decision, a longer time frame for trading might work better—perhaps weeks or months. If you are someone who can make fast decisions and think on your feet, then a shorter time frame might be best for you. Most traders go through many different approaches and systems, not because they haven't found the right system, but because they haven't found the right system for them. In many cases, it is the issue of a compatible time frame that is a major factor.
Most traders start out trading in shorter time frames and then Gradually expand to longer time frames. This is partly due to general inexperience and partly due to fear. Because gains or losses can occur quickly and sometimes appear to be random to new traders, a shorter time frame is attractive because it limits the amount of initial stress a new trader feels when he is learning to maintain or develop a market presence.
Some traders conclude that trading is a completely random event
and therefore they must trade a smaller time frame, such as minutes.
Others feel that the markets must reflect actual supply and demand fundamentals sooner or later, and they view day-to-day or intraday fluctuations as random noise; they focus on remaining on one side of the market for months at a time.
If a trader selects a time frame too short to begin with, that trader typically feels that things are moving too fast and they tend to have a lot of hesitation at entry points, looking for confirmation before Entering a position.
Even a small correction can be frustrating because that was a loss
that happened too fast, and often the market will return to the entry price quickly. If a trader selects a time frame too long for his temperament, the boredom of waiting for a trade to work over days or weeks will cause a desire to overtrade or try to force the market to pay him. The frustration of watching equity inhale and exhale daily by several thousand dollars will create a fear of loss and typically liquidation before the best objective is reached, because it is just taking too long to get there.
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