Which Timeframe Signals Should I Take?
I had an inquiry about trading timeframes yesterday. A new trader was confused about what trading signals to take in regards to different timeframes. To address the question, let me first back up a bit.
One of the most important things a trader has to decide is in what timeframe(s) he or she will operate. This is something I discussed in my book, and it’s something I’ve mentioned in previous posts on this blog. It’s an important element of your trading plan. You must trade in a timeframe which suits your personal schedule. If you don’t, you run the very real risk of attempting to trade in a way completely unsuitable to your needs. For example, day trading requires large blocks of free time to stay on top of the markets. Even swing trading has price watching requirements than can be tricky for many folks.
Once you know your timeframe, then it just becomes a question of matching that up with the timeframe of the types of trading signals you get. There’s probably some experimenting required to find the kinds of trades which work best for you in terms of their duration and requirements for checking and possible adjustment, especially for shorter-term traders. That shouldn’t be too much of a problem, though.
For example, if you are looking at swing trade ideas (meaning maybe a couple of days holding period) then you’ll probably want to look at charts of 1 hour up to perhaps daily. It can vary from market to market. For example, an hourly chart for forex has a different implication than an hourly chart on a stock because of the 24-hour nature of the former.
So figure out the timeframe most optimal for your trading (picking just one is probably best for a new trader), then experiement with the trading methodologies you are looking to employ to find the settings which best fit.
Struggling with support & resistance and knowing what the key market levels are? Check out the Price Distribution Analysis methods I use.
5 people have left comments
Posted on January 24, 2008 at 8:11 pm
Jonathan wrote :
Hi John
Nice blog. I typically use a top down approach when it comes to time frames. it would appear that getting a tradeable pattern on the monthly and the weekly gives that daily time frame trade a better chance of working out.
Of course this is an ideal situation. Sometimes if I can line up several time frames that are all moving in the same direction, I’m happy.
Posted on January 25, 2008 at 7:37 am
John wrote :
Jonathan – Glad you like what you’ve seen so far.
I’m in total agreement with you. The best trades tend to come when the timeframes are all lined up in the same direction. That said, though, the point I was making in the post is that you need to make sure you identify the timeframe you’re trading in, the one best suited to you, and not bounce around from timeframe to timeframe.
And definitely don’t start off with a short-term trade and then decide it’s a long term one!
Posted on January 25, 2008 at 2:22 pm
What Time Frame Should I Trade – Forex Forum wrote :
[...] is entirely a personal question that we really can’t answer for you directly. Give this a read: Which Timeframe Signals Should I Take? __________________ John Forman Author – The Essentials of [...]
Posted on January 27, 2008 at 8:29 pm
Robert Shaffer wrote :
John,
I have a serious question about broker stealing. This relates to how brokers, specifically options brokers, mark to market. I’m with Options Express and these people are thieves. Every day I buy dozens of contracts and they always mark them to the bid. I’m losing hundreds of dollars every day simply by virtue of the way they mark to market. For instance, I have some calls on FWLT. The last trade was at 7.2. I bought at 7.0. Yet they marked my trade at 6.4, the bid. Which means that, at 10 contracts, they’re telling me I lost $800 versus actually MAKING $200 based on the actual contract price. Optons Express is stealing from me, aren’t they…………….Your response is greatly appreciated,
Robert
Posted on January 28, 2008 at 10:11 am
John wrote :
Robert – I’ve answered your question here:
Is My Broker Stealing from Me?