Time Frame Explained in Detail

What does 'Time Frame' mean?

Time frame refers to the period that a trader chooses to operate in. The time frames can encompass seconds, minutes, hours, days or months. Traders may use multiple time frames to analyze and track a trade or they may just stick to one. Time frame is also written as timeframe. 

In trading, finding the right time frame can be a journey of discovery. Generally speaking, the shorter the time frame, the more technical signals it will produce. A 5 minute chart will naturally have more technical signals and chart patterns than a weekly chart because more price action is being displayed on the smaller scale, whereas a weekly chart shows daily price action by summarizing all the minute and hourly price action into a single daily data point. 

If a trader wants to be in the thick of the action, making decisions at a rapid pace, then a shorter time frame like 5 or 10 minutes may be best. If a trader wants more time and conformation on signals, then an hourly or daily chart may be best. A beginner trader should try out different time frames to find the one that suits him or her.

Use Timeframes that Match Your Goals

Often times, traders can get conflicting views of a Stock by examining different time frames. While the Stock Price on daily Chart might be showing an up-trend, the hourly can be showing a down-trend. But which way should we trade it?

This can provide conflicting signals and counter-productive unrest in the trader’s mind as they are attempting to line up trades. For this reasons, it’s important for the trader to plan the time frames they want to trade as they build their strategies. In many cases, traders can benefit from using multiple time frames; in an effort to incorporate as much information as possible into their analysis. 

Incorporating a longer time frame will allow the trader to see a ‘bigger picture’ of the Stock so that they may get an idea of ‘general trends,’ or the sentiment that may exist; while the shorter time frame chart can be used for plotting the actual trade. This leads into a very popular permutation of technical analysis in which traders incorporate multiple time frames into their approach.

Here are the timeframes used by different Traders using Trading style.
  • Intraday Traders : 1 minute, 5 minutes, 10 minutes, 15 minute. 
  • Swing Traders : 30 minutes, 60 minutes, Daily. 
  • Positional Traders: Daily, Weekly, Monthly. 
As I told you earlier, you must know what Type of Trader you are. Then use these timeframes to trader with.

Trend exists in all timeframes, Trend in one timeframe may or may not be the same in every Timeframe.

In simple words if you are a Long term (Positional) trader and you see a clear Trend in Higher timeframe like Weekly/Monthly, then it doesn’t mean that you will buy it for few days hold as a Short term (Swing) trader.

Similarly, If you are a Short-term Trader and you see a Up-Trend then it does not mean that you should go ahead and take Intraday Trades. (It is possible but needs far more experience and knowledge as Intraday Trading is all together a different world.

Same Chart different Trend and sentiments:

In the chart above, you can see the numerous opportunities. Trader would have had shorted the Nifty in Day trading (with 5 minute chart) within shaded area. 

A Trader with Short-term view, when see the chart in 60 minute timeframe would like to stay away from the chart as Price has breached 100 SMA Trend filter. 

Same shaded area, for a trader doing Multiple time frame analysis, however, can easily spot the Buying opportunities for Short-term with Daily timeframes which offers the ‘bigger picture view’ from the longer-term chart so that traders can properly grade sentiment and trends. 

Trader with longer-term view can easily say that it’s not a time to buy here and let’s wait for a healthy Pullback.

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Time Frame Explained in Detail Time Frame Explained in Detail Reviewed by Admin on July 20, 2019 Rating: 5

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