DislikedIn that case, I'll have a go.
Time is a manmade concept. Timeframe should not be a variable in determining position sizing.
Instead, what should determine your position sizing is your appetite for risk and the edge of your system - if that is even quantifiable. Theoretically, if your edge is the same in all timeframes, position sizing should be the same as well.
The issues you describe when trading shorter timeframes (e.g. being prone to more mistakes,) have a negative impact on your edge. Additionally, it can be argued that shorter...Ignored
Those who have said that there is more noise to signal on 5m than on daily are correct. In general noise increases relative to PA signals as timeframe falls (but not in an absolute or linear fashion).
Those who have said that commission, spread and slippage increase as a proportion for the same type of trade as you drop in timeframe are also correct so the cost of trading increases.
Something that hasn't been mentioned is that shorter timeframes call for quicker decisions and quicker recovery from problems and emotions which translates into -- harder to trade unless your skill levels are high or ice runs through your veins.
However.
Some timeframes offer more tradable signals than others because the collected actions and patterns of traders at that timeframe and the effect of those above and below offer better signals. Popular timeframes, like popular tradables (es vs dow and r in futures come to mind) can get noised up by the games of the participants. For some though, those games offer profit.
The shorter the timeframe the more opportunities that should be available in a week.
So, given the noise and costs then shorter timeframes are likely to have lower expectancy than higher; and worse kelly criterion for the same type of trade. So position sizes should be smaller.
But on 1m you might get 40 opportunities a week vs 1 on 4 hour. So, assuming you've got your discipline etc together, then even if you can only risk 1/2 percent on minute vs 2% on H4 you can make 10x as much on M1 without compounding.
(Yes, I know you can trade other pairs to increase H4 opportunity, I'm just laying out the logic)
Those who have said that commission, spread and slippage increase as a proportion for the same type of trade as you drop in timeframe are also correct so the cost of trading increases.
Something that hasn't been mentioned is that shorter timeframes call for quicker decisions and quicker recovery from problems and emotions which translates into -- harder to trade unless your skill levels are high or ice runs through your veins.
However.
Some timeframes offer more tradable signals than others because the collected actions and patterns of traders at that timeframe and the effect of those above and below offer better signals. Popular timeframes, like popular tradables (es vs dow and r in futures come to mind) can get noised up by the games of the participants. For some though, those games offer profit.
The shorter the timeframe the more opportunities that should be available in a week.
So, given the noise and costs then shorter timeframes are likely to have lower expectancy than higher; and worse kelly criterion for the same type of trade. So position sizes should be smaller.
But on 1m you might get 40 opportunities a week vs 1 on 4 hour. So, assuming you've got your discipline etc together, then even if you can only risk 1/2 percent on minute vs 2% on H4 you can make 10x as much on M1 without compounding.
(Yes, I know you can trade other pairs to increase H4 opportunity, I'm just laying out the logic)
