This week’s question comes from Marguerite, who asks:
Which is better to use, the 4-hour time frame or the daily?
It’s no secret that I favor the higher time frames. I’ve found them to be far superior in every way compared to something like the 15 minute or even 1-hour time frames.
But which is better, the 4-hour charts or the daily?
The answer to that question depends on several factors. However, I can tell you that I favor one over the other.
In fact, I even recommend that novice or struggling price action traders begin with one and then eventually move onto the other.
By the time you finish reading this post, you will know which one I favor. I will also share how you should progress between the 4-hour and daily time frames. We’ll even discuss how I use the weekly and monthly charts.
Let’s get started.
A Common Mistake Among Traders
Most traders I speak with tend to believe that the daily time frame is reserved for those with large trading accounts. This is probably due to the larger stop losses that the daily charts demand.
However, larger stops do not equate to more risk. You simply need to adjust your position size accordingly.
This idea that the daily charts are reserved for the big hitters leads most traders to the smaller time frames. Even those who have joined my community and know I trade the 4-hour and daily charts tend to start from the wrong end.
What do I mean by ‘wrong end’?
A trader faced with either the 4-hour or daily time frames will usually choose the former. The thinking is that once they are profitable on the 4-hour they can move to the daily.
That’s the wrong way to go about it. In my experience, the daily charts are far easier to trade than any others, including the 4-hour charts.
There is a very good reason for that and it comes down to liquidity. You see, the more liquid a market is, the better it responds to technical levels.
A 24-hour candle contains more volume than a 4-hour one, right? So which one do you think produces the better signals?
Therefore, if you have been struggling to trade price action on anything lower than the daily time frame, I know one reason why.
Commit to trade from the daily time frame and nothing else for a month. I can all but guarantee that you will find more reliable signals than ever before.
What About the Weekly and Monthly Time Frames?
Usually when I mention how higher liquidity can mean more reliable signals, someone inevitably asks about the weekly and monthly time frames.
You know what? That thought process makes perfect sense.
After all, if a daily candle contains 24 hours of volume, wouldn’t a candle with 120 hours supersede it?
How about a monthly candle with 480 hours?
Yes and no. On the one hand, I like to use the weekly and monthly charts as a ‘big picture’ guide. By that I mean that a weekly pin bar or engulfing candle can signal a move higher or lower for the week ahead.
However, I don’t trade directly from the two time frames. In other words, I don’t open and close positions based on weekly and monthly signals or levels.
I do, however, use them when identifying key levels. It’s particularly useful when viewing the last few years of price action for a market.
I also pay attention to pin bars and engulfing candles that form on the weekly and monthly. If I find one, I will move to the daily chart to fine tune my levels and develop a plan for the week ahead.
Here’s how that works:
Notice how the bullish pin bar on the monthly chart above formed at a key support level. There was even a bearish pin bar several months prior that led to a multi-month decline.
Once I’ve identified the bullish pin bar above, I start to formulate my plan for the coming week.
Here’s how the daily chart looked shortly after that monthly pin bar formed:
The downward sloping flag pattern above shows how we could have entered on a retest of the area as new support.
Now, this isn’t just me pointing out something that has already happened. We traded the USDCAD setup above. You can see the commentary here.
In summary, I use the weekly and monthly time frames to help identify key levels and signals and then drop down to the daily to find favorable entries. I don’t always do this, but when it makes sense as it did with the USDCAD, it can be incredibly effective.
Both the 4-hour and daily time frames can be exceptionally advantageous for the price action trader. I use both when trading the Forex market, though I do favor the daily time frame.
A common mistake traders tend to make is to start on a lower time frame such as the 15-minute or 1-hour charts. They believe that a higher time frame like the daily is reserved for those with large trading accounts, but that simply isn’t true.
If you’re just starting out with price action you should try to stick to the daily time frame. Only once you’re able to turn a consistent profit should you consider moving to the 4-hour charts.
The reason for this is a matter of liquidity. There is more trading volume in a 24-hour candle than a 4-hour one. As such, signals that form on the daily chart tend to be more reliable.
Don’t forget about the weekly and monthly time frames. Although you may not want to trade them directly due to the long holding periods, they can offer hints about where a market might be headed.
Your Turn: Ask Justin Anything
I’d love for this new weekly Q&A to be successful and provide an invaluable repository of answers to common Forex questions.
To do that, I need your help.
Here’s what you can do to get involved and have your question answered in next week’s post:
- Ask questions. Post them in the comments below or Tweet them to me @JustinBennettFX
- Help me answer questions. If I missed something or if you have something to add, don’t hesitate to leave a comment below.
By the way, if you need New York close charts you can use Daily Price Action’s preferred Forex broker.
Get started for free here: https://www.blueberrymarkets.com/lp/dailypriceaction
Justin you are correct, thanks for the good job
1 hour works well for my price action strategy , I use daily for support and resistance.
Thanks for sharing.
Price action trading is the best by my experience. Also trading daily platform gives you peace of mind as a Starter. When you master price action movement, you are save to go to lower time frames. Many traders who now have more time to trade have the opportunity to switch though.
Hi boss, hope you are fine ,your little thinks our sufficient profits pls don’t stop it never.
I really enjoy reading your articles and they have been useful to my trading career but i want to know if you have a trading group chat like whatsapp, telegram or Skype bcos it will help to bring you closer to your subscribers. Thanks
Pleased to hear that. Well, I do run a paid community. Details here: https://dailypriceaction.com/forex-price-action-course-sale
I also have a Telegram channel, but it isn’t interactive like the paid community. https://t.me/justinbennett
Thanks, Justin. Good food for thought. My guess is that most of us amateurs are in fact price action day traders, where I see the daily charts as most important. The issue for me though is what duration candlesticks you use when assessing the daily and then four hour charts? By the way, I’m most comfortable with positions that close within an hour, with multiple trades in a day. Good or bad??!! All the best, Keith
You’re welcome. I’m not sure what you mean by “what duration candlesticks”.
If it works for you and compliments your personality, then it’s good. If not, you may need to find a different approach.
thanks ok sir advice.
Do you mean to say new traders should use the weekly time frame to trade? If so, does it mean that the trade will last for a week?
Secondly, how do you determine a trade that will last a day, week or month.
Is it advisable to enter a trade from the weekly time frame?
Thanks for the comment. No, as I mentioned in the post, I use the weekly and monthly to look for signals but I don’t necessarily trade directly from those two time frames. Take another look at the second section of the post.
Don’t worry about how long a trade will last. Instead, identify key support and resistance and then trade between the levels.
I use daily time frame and so far it’s been fantastic. Thanks
Mr tijanii I just started the price action race now, hoping to be better so am studying hard to be a profitable trader.
Since ur better with the daily chart what’s ur advice for beginners like us.
Am a Nigerian .
Mind Sharing .
If Daily timeframe show a doji , will u take action on that ? Eur/Usd . Next Monday open market
Hi James, a doji suggests indecision, so it wouldn’t persuade me to buy or sell.
It looks like a hangman posture.
Question about MT4 Platform, when i click on Weekly or Monthly
all my candles move to extreme Left, is there any way to fix that?
Doug, you should follow up with your broker. Most likely you just need to drag the chart left or right for it to correct.
I am sorry what is your favourite broker?
And does it incorporate the Mt4 platform?
Hi Roberto, check out Blueberry Markets if you live outside of the US: https://www.blueberrymarkets.com/lp/dailypriceaction
Yes, they offer the MT4 platform as well as New York close charts.
Tha Thank you for sharing Justin well said.
We are so lucky to have you Justin! You explain everything in such simple terms and appreciate all you do!
I agree that daily chart is the best for signals and direction. But I prefer 4hr chart for entry and exit. It has a lower risk
please explain this method, why is it low risk on a 4hr?
Hai….justin nice article again thanks for the effort.
why is newyork charts considered the best among the other charts
I mainly use the daily timeframe.
I think in time I may get to use the 4hr in the same way.
Sometimes i will enter a trade on the 4hr and then follow it on the daily, just because on the daily there are less candles to look at and i dont feel so overwhelmed.
Do you hold on position for weeks even though there might be gaps? Please help.
yes. gaps are not really a problem on the daily timeframe. Remember you adjust your stops to accommodate on the daily.
Do you base your decisions on the daily and then drop to a lower time frame to manage the trade?
Love your explanation a lot: detailed and concise, frank and devoid of deceit.
Please, I want to ask: when a trend reverses or change direction, at what point do you enter the trade or place an order?
For how long can you hold on to a position when trading daily price action? thanks.
Exactly my question cuz I don’t know if I can hold position for a weekend cuz I don’t know what gaps may do.
With the daily time frame where can i place my stop loss with a small account
If a daily chart shows down trend and a 4hour chart shows uptrend. which should I follow. Thanks.