How to Choose the Right Market and Time Frame

In the previous article, we explained how financial markets function beneath the surface. We described the market as an auction driven by liquidity and the interaction between institutional and retail participants. Understanding market mechanics is the first step. The second step is more practical: deciding where and how you will trade.

In this next episode of the "Road to Your First FTMO Reward" series, we will break down the criteria for choosing the right market and time frame and also how to properly read market structure by using a multiple-timeframe strategy.

Why Market Selection Matters

Not all markets behave in the same way. Although the principles of price action are universal, volatility and structural characteristics differ significantly between instruments. When selecting a market, you should evaluate four fundamental factors:

• Liquidity
• Consistency of volatility
• Readability of structure
• Trading costs (spread and execution quality)

How Do These Factors Play Out in Practice?

When we apply these four criteria to a trading environment, we find that different instruments offer completely different opportunities:

• Major Currency Pairs (Majors): Pairs paired with the US dollar (EURUSD, GBPUSD). They excel in the first and last factors. They feature the highest liquidity and the lowest spreads (costs). Their structure tends to be highly readable, making them an ideal starting point for beginners.

• Equity Indices: (US100, GER40, US500). In terms of volatility, this is a completely different world. They are much more volatile, move faster, and require stricter risk management. On the other hand, they often offer high structural readability in the form of very clean and strong trends. Therefore, they are ideal for trend-following strategies, especially during the relevant market session. At FTMO, you also have the advantage of trading indices with zero commissions.

• Commodities: (Gold, Silver, Copper, Crude Oil). Behaviour here varies significantly. Gold, thanks to its high liquidity and easily readable structure, is stable and ranks among the most popular instruments at FTMO. Conversely, crude oil has extreme volatility and makes sharp moves, ideal for scalpers and experienced traders with proper risk management.

• Cryptocurrencies: (Bitcoin, Ethereum, Solana, Litecoin). They offer high volatility, which can create significant opportunities but simultaneously increases risk. Liquidity can vary depending on the specific pair and trading hour. The structure tends to be less stable, and movements are often impulsive.

Tip: Choose a maximum of 1 or 2 instruments to begin with. Monitor them every day. You will quickly discover that each market has its own "personality" and a specific rhythm in which it moves. Based on this, you will find out what suits you best.

Choosing the Right Time Frame

A time frame defines the period over which one candle is drawn on the chart (ranging from 1 minute to 1 month). There is no single "best" time frame for everyone; the right choice depends entirely on your trading style, psychology, and the time you can dedicate to trading.

Basic breakdown by trading style:

• Scalping (M1 - M5): Extremely fast trades lasting seconds to minutes. Requires constant chart monitoring, quick reactions, and excellent stress management.
  
• Day Trading (M15 - H1): Intraday trading. Positions are opened and closed on the same day. Requires patience while waiting for a setup, but you do not carry the risk of holding a position overnight.
  
• Swing Trading (H4 - D1): Trades last for days to weeks. An ideal approach for traders who work alongside their trading, as it only requires checking the charts once or twice a day.

Selecting your main time frame is, however, only the first step. If you were to monitor exclusively a single chart, you would miss the broader context and an overview of what is happening in the market over the longer term. This is exactly why many traders utilise multi-timeframe analysis.

What is Multi-Timeframe Analysis (MTFA)?

Professional traders almost never rely on a view from just a single chart. Multi-Timeframe Analysis (MTFA) is a technique where you analyse the same instrument across multiple time frames simultaneously to gain a comprehensive picture of market activity. The foundation of this analysis is dividing the market into two timeframes:

• Higher Time Frame (HTF): Used to determine the main trend, the overall market context, and to identify strong zones of support and resistance (Support & Resistance / Supply & Demand).
  
• Lower Time Frame (LTF): Used for the actual execution (entering the trade). It allows for more precise entry timing, which significantly reduces the size of the stop loss and maximises the reward-to-risk ratio.

Key Takeaways from Today's Episode

• Less is more: Do not monitor dozens of charts. Choose just 1 or 2 instruments at the start and get to know their specific "personality".
• Respect the market's character: While EURUSD is more stable and has low costs, instruments like US100 and oil are more volatile and require stricter risk management.
• Don't look for the perfect time frame: It doesn't exist. Choose one that suits your trading style (scalping, day trading, or swing trading) and your time for trading.
• Connect the timeframes (MTFA): Never trade based on a single chart. The higher timeframe (HTF) will show you where to trade; the lower timeframe (LTF) will precisely time when to enter with minimal risk.

What can you look forward to next time?

Next time, we will look directly at the charts. We will break down simple price action, explain common market movements, and introduce key price action patterns. These will serve as a solid foundation for building your own trading system.