For the past 2 months or so, one of the trending questions, I have seen from new and struggling forex traders is : What is the best timeframe for small account and which strategy can you recommend for a small account? Although I have answered this question in some of my articles, the team at Motivation.Africa still want me to provide an answer so that it can help others who may not be able to connect with me directly.
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So What’s the Best Forex Timeframe for Small Account?
Let me start with a story, the forex market is like a real world market; in the real world market people go to the market to buy and sell their product/services. In some cases, those with small capital may go to the market early and get a good deal, in other cases, they can go to the market late and also good a deal. The secret is, as long as they know their way around the market, understand the basics of negotiation, they can always cut a better deal for themselves no matter the time they enter the market.
It’s true that those with big capital can afford to play around in the market, but one thing is certain, if they don’t know their way around the market and they don’t understand how to negotiate, they may end up not getting a good deal or buying stuff they don’t need which may deplete their capital and those stuff can end up in the dustbin especially if they were near expiring and they didn’t notice at the point of negotiation.
So what most people do before going to the market is to develop a list of item they need and possible prices, have a budget before going to the market. Having a list, budget and possible prices is a proven strategy that has helped many people succeed in the real world market.
The forex Market is not different from the real world market. In forex, you are either buying or selling a currency or indices. Before buying, you have to do some analysis, it maybe technical, fundamental or just pure price action analysis, the goal of every analysis is to know the best price to buy or sell a currency pair or indices, have an idea of your total expected profit and possible loss, before taking a decision either to buy or sell in the market. If you don’t consider your expected profit and losses before taking a trade, even if you use a big capital, It’s a bad trading habit that can help you to lose your capital as soon as possible.
So when looking at the best forex timeframe for small forex account, we consider a 3 timeframe analysis, which is otherwise called a multi-timeframe analysis. We used a two higher timeframe to understand the trend, then a lower timeframe to spot an entry.
It is important to know that even in a sell trend on a daily timeframe, some people can buy the retracement on the lower timeframe and make good profit while still staying focus on the sell trend on the higher timeframe. I will recommend using H4, M30 for analysis and M5 for entry. You can just view the overall trend on the daily timeframe, then draw your trendline on H4, and point of interest on M30, then wait for entry on M5.
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Read: The Complete Guide to Price Action Trading
The major difference between a small account and big account in forex is that a bigger account gives you the leverage to explore more options in the market, however, a big or a small account without a good strategy is a recipe for failure no matter the trading timeframe. So develop a strategy, test it on Demo account before moving over to your real account