Why is work on higher timeframes more effective?

As we have already found out, with an increase in the timeframe, the expected profit size increases and the degree of risk decreases. This dependence can be seen more clearly by the example of processing signals on different timeframes from one of the most popular and simple strategies – “Breakdown 3 ЕМА”.

The figure shows the signal processing for this strategy on a 1D timeframe. As you can see on the chart: out of 7 deals opened by signals from the strategy, only one deal closed with a loss of 92 points. The remaining 6 transactions closed with a total profit of 18050 points for half a year. Now we analyze the processing of signals from this strategy, but already at a lower timeframe – 1H:

As you can see on the chart: out of 8 deals opened by signals from the strategy, only 2 trades closed with a profit, and the remaining 6 made a loss. This happened because the fluctuations in this interval occur more sharply and dynamically relative to moving averages, and the indicator simply does not have time to respond to price changes.

On higher timeframes there are no such sharp drops in price, therefore the strategy’s overall performance is higher.

We have analyzed an example based on one of the strategies, but the result of using others will not differ much. Because, the fault is not the wrong strategy, but the dynamics of fluctuations within the day.

There are special strategies for working in the short term, which are called scalping. The principle of their action is to fix a small profit and make a trading result due to the huge number of transactions. But all these strategies with manual control cause irreparable harm to human health due to a large amount of time spent in the market and, as a result, practically do not bring the desired result. Scalping strategies based on trading robots are not worth analyzing at all, because most of them are developed in order to trade commission and spread due to the huge number of transactions (more than 300 per day).

In any case, there are a lot of trading strategies and everyone can choose a strategy for themselves. The most important thing to consider is the time you are willing to devote to working on your strategy. As global statistics show, the most successful are universal strategies used on higher timeframes.

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