Choosing the Best Day Trading Chart Time Frame

Graphic trading charts can be based on many time frames. Some even use non-time-related measures such as the number of trades made or their price range. It can seem like a daunting set of choices. If you trade prudently, picking the best time frame or other variables for a certain trading style and type of asset becomes very simple.

How New Traders Choose a Time Frame

Like many new traders, you can spend days, weeks, or even months trying every possible time frame or parameter looking for the one that makes a profit. You may try 30-second charts, five-minute charts, for example. Then you try all the non-time-based options, including tick charts and trading volume.

When none of these makes a profit, you may think you made an incorrect choice and try them all again, assuming you must have missed something the first time through. When you still don’t find a profitable choice, you adjust your trading system or technique slightly and then try all of the time frames again.

If that belief sounds reasonable to you, then be careful, because you may be about to enter the never-ending time frame search from which many new traders never emerge.

How the Pros Choose a Trading Time Frame

Professional traders spend about 30 seconds choosing a time frame if that. Their choice of time frame isn’t based on their trading system or technique—or the market in which they’re trading. It’s based on their own trading personality.

For example, traders who tend to make many trades throughout the trading day might choose a shorter time frame. Those who typically make only one or two trades per trading day might choose a longer time frame. Traders may also switch their time frame on a given day, depending on how actively they’re trading.

Why Time Can Be Irrelevant

When evaluating a certain time frame with regard to your trading method, a price pattern that has significance on a two-minute chart will also have that meaning on a two-hour chart. If it does not, then it is not a relevant price pattern.

Trading Charts Based on Factors Other Than Time

Trading parameters that are not based on time should generally be used only with trading systems that are meant to use them.

For example, a trading system may be created using a 100-tick chart. That is a specific system with a move occurring after 100 transactions have taken place.

If a trading pattern is based on the size of a price move, then time doesn’t matter. You should select a chart such as a Renko chart, which lets you base the chart on price movement. It gives the trader a simpler view of patterns, trends, and factors like price reversals that occur during the course of the trading day.

There is nothing wrong with using non-time-based variables if that’s what you prefer. They may be more visually appealing to you and thus easier to read. Just don’t assume that any single chart style gives you an inherent edge.

By Adam Milton | From TheBalanceMoney.com/Trading

Key Takeaways

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Each trading system or technique—and probably every market, too—has one optimal time frame or other variables that it will work best with.

The reason professional traders do not spend endless amounts of time searching for the best time frame is that their trading is based on market dynamics, which apply in every time frame. The levels of supply and demand affect prices.

If your trading system or technique is not making a profit, there is nothing wrong with the time frame. The fault is with your trading system or technique.

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Master Coach Summary

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A combination of the 5 minute and 1 minute time frames may be used by day traders who concentrate on a single stock at a time. Although the 2 and 3 minute time frames are also frequently employed, most traders use the 1 and 5 minute time frames. Compared to indications on less frequently traded time frames, setups on the chart are more likely to be followed through on.

The weekly chart is the ideal time frame for swing trading. That is as a result of the greater time frame’s overall power. You can tell whether a stock is moving right away. Trend shifts are simple to identify, and a trend break can have a huge impact. To increase risk reward ratios and money management, the weekly time frame can also be coupled with a shorter time range.
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Trading Application

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60 Minute Time Frames
The 60-Minute time frame is widely used by swing traders, but multi-time-frame analysis offers the possibility of winning day trades by fusing this chart interval with a lower chart interval. One thing to bear in mind is that the first candle starts at 9:30 each day, and typical trading hours are from 9:30 to 4:00. As a result, the final 60-minute candle of the day only includes information from the final 30 minutes of the regular trading session from 3:30 to 4:00.

15 Minute Time Frames
The most common time period for day traders who focus on many equities throughout the day is probably the 15-minute window. The chart interval should be higher the longer the watchlist. You must have a chance that is both reasonable and adequate to scan and assess current market behavior. You run the risk of missing the finest entries if the time frame you select is too short and too many stock symbols are screened at once.

5 Minute Time Frames
High volatility stocks move quickly, and traders who concentrate on just a few stocks each day usually employ the 5-minute time frame. In the first hour of trading, the 5-minute chart is particularly useful. The duration between each candle is adequate for stock analysis and order preparation.

1 Minute Time Frames
Trading on short time frames, such the one-minute chart, calls for discipline and a thorough knowledge of the market’s structure. You must be aware of what you are seeking. For instance, the likelihood that the next higher low in the 1-minute time frame will enable you to open a trade with low risk and high potential increases if a highly volatile stock smashes the previous day high with significant momentum.

Multi-Time Frame Analysis
Trading against the main trend is a common temptation for novice traders. The longer time horizons are frequently not taken into account at all. To find entry with a high profit potential, it is best to move from the longest time frame to the shortest one. Bullish emotion is present if the price is above the day’s high, above the 60-minute opening range, and has numerous higher lows and higher highs. It is against the trend to short such stocks, and there is a good likelihood that a short squeeze will result in the next high. The trend is determined by the higher time frames, and following the trend until it is broken is the most profitable strategy.
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