The smaller the timeframe, the more difficult it is to develop a successful system.
In other words, developing a system to trade on a 5-minute chart is more difficult than developing a system that trades on a daily chart.
There is a lot more noise on the smaller timeframes.
Given the massive amount of data you would need to test the system over the years and years of different data, it can be a challenging task.
Smaller timeframes often mean less profit per trade and less risk per trade.
It’s a good idea to strike a balance between your trading account size and the risk you are willing to take.
The New Trader’s Trap
Let’s take a look at what’s called the “New Trader’s Trap”:
- The smaller your trading account, the smaller the time frame you should trade.
- The smaller the timeframe, the more difficult it is to trade.
Do you see the trap here?
New traders often come into the trading world with very little cash, hoping to make a quick buck.So they trade small timeframes because they think intraday trading is the way to make money.
They start trading on a 1-minute or 5-minute chart in hopes to scalp the market a few pips here and there.
By doing so, they suddenly put themselves in a very difficult spot because they are trading a very difficult timeframe when they are least experienced!
Avoid the Quick Fail
They set themselves up for a quick fail.
It’s much easier to develop profitable trading systems on a daily time frame than on a 5-minute chart.
Because of this, we recommend that new system traders build trading systems on daily charts.
It doesn’t matter if you ever plan on trading those timeframes. You do it to build confidence and skills in developing profitable systems.
Because you are more likely to develop a profitable system on a daily chart than a 5-minute chart, you should start on the daily chart.
Why bang your head against a wall and discourage yourself? Build your confidence and skill level then move on to more difficult intraday timeframes.
