What Time Frame Should I Use On My Charts? http://www.financial-spread-betting.com/course/technical-analysis.html PLEASE LIKE AND SHARE THIS VIDEO SO WE CAN DO MORE! What is the best timeframe to trade? Up to now, we’ve looked mainly at daily price charts, which are possibly the most commonly used charts. With a daily chart, each day is represented by one candlestick with the opening price in the morning, the high and low during the day, and the closing price at night. This is suitable for many traders who like to check their trading positions in the evening after work.
But there is no reason why the chart can’t be based on any time frame, and you’re free to choose from the different time frames offered by your software to pick the chart that gives you the information you need. In practice, many traders will look at several different adjacent time frames to give an overall picture of the market as well as detail for entering trades.
On the one hand, you might look at weekly or monthly charts, which will show you historical data going back over time, and set the scene for how the market got to where it is. Generally though, these would be useless for timing any trading decisions.
If you are day trading, you would certainly work from charts which showed you a much shorter period than a day. You might try one minute charts if you are scalping, and five minutes, 15 minutes, or an hour if you’re planning on making trades during the day.
You need to make sure that you have sufficient information for your purposes. You can always develop longer-term charts from short-term charts, i.e. produce a daily chart from a 15 minute chart, as you know the opening and closing prices for the day, and the highest and lowest prices; but you can’t work the other way round, as a daily chart can never be split up into 15 minute periods, you just don’t have the information.
Being able to work from several different time frames is one reason that many traders choose to have more than one monitor. The longest time chart sets the scene so that you do not find you’re bucking the general trend, at least not without doing it knowingly. The middle time chart is used to identify a trading set up, which we’ll be learning about in later videos. The short time chart can be handy to optimize the exact time of entry into the trade.
When you’re picking what charts work best for you, you have to take into account how you are trading and what your objectives are. Many people are not temperamentally suited to intense day trading, which requires concentration and planned bathroom breaks to fulfil successfully. So for them to look at five minute charts would simply be confusing and not add anything to their knowledge for the purposes of trading.
An alternative is short-term trading or swing trading, in which you hold a trading position for days or occasionally weeks, and often a daily chart will provide you with all the information you need to decide on your course of action. There are no hard and fast rules about what periods you should be trading, and it is up to you to decide what works best for the time you have available.