Judging by the frequency with which I find myself answers questions about it these days, trading timeframe is a big concern for folks. It’s the subject of this email I received recently.
IÂ wish to be enligthened about the issue of time frame. Why work or choose a particular timeframe? Of what impotance or what are each of the time frame good for.
I’ve seen people saying use 15min for intra day, 1hr for daily …………………. the question is WHY? If that is the given, why is it so.
This set of questions indicates to me something I’ve also seen recently in a forum discussion about Bollinger Bands where a poster asked the question which timeframe Bands were the best ones – that some people are looking at the timeframe question backwards.
Decide on Timeframe First
Timeframe is one of the very first decisions you should make in your trading – before the market and before the methodology. You pick your trading timeframe based on what fits best with your life. Most people in this world cannot reasonably be day traders because of their work, school, family and other commitments, for example. Some people, though, can. Many of us have a few different possible trading timeframes we can consider. Regardless, we should pick the one(s) which are most comfortable and consistently accessible.
Once you’ve figured out which timeframe suits you best you can move on to sorting out the best market for you, how you’re going to trade, and the settings for any indicators you may employ.
Picking a Chart Timeframe
Once you have a defined trading timeframe, assuming you’re going to use technical analysis methods, you’ll have to select which chart time you use. The basic rule here is that you pick the one(s) which produce trades of the timeframe you have determined. That is going vary somewhat by the market you trade and the methodology you use. For example, trading off 1 hour charts in the forex market doesn’t have the same timeframe implications as trading those same charts in individual stocks because of the 24-hour vs. defined trading day difference. At the same time, a moving average cross-over system may have a different trade time scope than a system which takes more of a range-trading approach.
The bottom line is that you will probably have to experiment a bit to find the right timescale of charts and such to meeting your holding period needs.
Word of Advice
Do not take what you read in forums and hear from other traders as gospel. We all have different trading needs and styles. What works for someone else may not work for you and vice versa. For example, I recently saw a forum poster say that using Bollinger Bands on any timeframe above an hour was completely worthless. That’s pretty much the exact opposite of my own experience. This stuff isn’t going to come quick and easy. You’re going to have to try different things out to see what fits and what doesn’t.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.
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