Time Frame

When you first start trading you will find that every timeframe works and does not work depending on the day, time of day, and your strategy. That being said, here are the most important questions that you need to ask yourself before getting started:

• Am I an Investor (Long Term - Months to Years), Trader (Intraday - Minutes, Hours, Swing - Hours to Weeks), or Both?

• How often do you want to check your positions?

• What hours are you available to trade?

• What is my risk tolerance?

There is no perfect time frame to trade. The time frame you select will determine your strategies and how you will enter, hold, sell, or sit on your hands. Generally speaking:

Intraday Trader/Scalper

• • Want to get in and out of a trade in minutes to hours and will not hold positions overnight

  • Intraday traders will often use the 5 min, 10 min, or 15 min to determine entry, exits, and holding within a trade

Swing Trading

• • Swing Traders look to hold a position for days, weeks, or months depending on market conditions

  • Swing traders may use the smaller time frames, but will often use the 1 hour for entry and exits, but make most of their trading decisions off the daily or weekly charts.

Investors

• • Looking at the long haul and want to often hold positions for weeks, months, and even years

  • Their positions often look at dividends or covered calls to generate additional money on their investment as they hold

  • These people often use the daily chart for entries and exits, but make most of their trading decisions off the weekly, monthly, and annual charts

The simplest explanation is that the timeframe works best for their strategy and time. If you can only check the market once a day, using the 1 minute time frame does not help you to get an overall picture of the market and what could happen next. Conversely, if I want to be in and out of a trade quickly, using a weekly chart will not help me to pinpoint my best entries and exits.

Another reason why we use time frame pairs is to avoid the noise of the market. It is easy for us to get caught up watching the 1 minute candle and it spiking up and down every minute. But, if we were to take a look at the overall daily candle at the end of each day, we would probably see that a one minute intraday candle really had very little bearing on the day overall. To avoid overreacting to price movement, we use pairs to give us a big and small picture of price action. Here are the common pairs used by traders.

Time Frame Pairs

• Month/Week - four weeks in a month

• Week/Day - 5 days in a week

• Daily/1 HR - 7 hours in one trading day

• 1HR/15 min - four 15 min sessions in one hour

• 30 min/15 min - two 15 min sessions in 30 min (I use a mix between 15 and 30 minutes for the opening candle)

My overall thought on which timeframes to use is to simply select a few time frames based on the type of trader you want to be and implement your strategy. After you gain consistency, you can start to adjust your strategy and time frame to suit your needs.