Trading Time-Frames

Different Strokes For Different Folks
In this article we are going to discuss trading time-frames and which ones are potentially the most reliable for different trading styles. By time-frame, I am referring to a chart of a market depicting bars with various time lengths. Every day when I log into my trading software I need to know which time-frame is trending best. Everyday this can change, for instance the 5 minute chart could be trending well on one day versus the 1 hour chart another day. This is a very daunting task, trust me.

Guidance Chart
What most traders don't know is you need to use a guidance chart. A guidance chart will usually be the daily or four hour charts. All you need to do is open it and see which way the market is trending, if it trend up, then you're only looking for longs for the day. If it's trending down then you're only looking for shorts for the day.

Now we need to narrow down which time-frame you will be trading from and this time-frame can vary dramatically. This is very difficult to figure until you know what style of trading you plan on attempting and realistically how much time you plan on spending in each trade.

Tick Charts
They represent the number of trades per bar and are often used to time trade entries in the direction of time-frame based charts. Examples would be a 377 tick chart in conjunction with a 15 minute guidance chart. Tick charts will be quicker to provide entry setups than time based charts in general, assuming the market of interest has sufficient trading volume. It should be kept in mind that the shorter the time-frame chart or the smaller the number of trades (ticks) per bar used will likely increase the frequency of trades and therefore generate more risks, whipsaws and more trading commissions. Personal stops vary on this method of trading and most people for the entry set-up (ES) use 5 to 10 points stops.

Remember: Trading from smaller or shorter time-frames generally carries the most risk.

Trading the 1-10 minute charts time-frame in my opinion carries the most risk. Why? With shorter time frames you have a shorter trend, which makes it much more difficult to predict the next move. Plus on a regular basis I see traders being stopped out with small losses that add up quickly.

Trading the 5-10 minute charts is a better day trading time-frame from my opinion. Many of ZLBT's visitors think the term "Day Trading" is all about action, and going in and out of the markets. This couldn't be further from the truth. In all of my years I've never seen ONE retail trader successfully scalp any market.

Trading the 10-30 minute charts is even more conservative than trading 5-10 minute charts. However you have a lot less entries. Expect to hold a trade using this time-frame for about 45 minutes.

Trading the 30-60 Minute charts is more conservative than the previous times frames. But once again you will have fewer entries and will have to exercise patients. For some reason most day traders don't seem to have a lot of this. I think we should all take a class in patience and if a trade is going your direction there is no reason for action.

Trading the 1hour-4hour charts is by far ZL's favorite time-frame and the trades I have the most confidence in. When I see an entry using my exponential moving average setting, I usually take the trade. But once again with this higher time-frame you must risk more and higher cutloss points. I always trade from a picture therefore my stops vary depending on the volatility I see.

Daily Charts
I would only use for position trading, yet carries more risk because your stops must be wider to not be "stopped" out, realizing you have picked the right direction. But remember to always use stops.

Writer's Note:
I've noticed with my own trading when someone else gives me advice I seem to believe this as facts or plain hogwash. Again this couldn't be further from the truth. Do you think "Researching" your market truly helps? Are you able to tell the difference between rumor and truth? Fundamentally or technically? Probably not, so how many times have you been stung by someone else's recommendation? Probably more than you realize, so my advice would to use your own common sense and judgment. Remember to always practice and take that skill set into your live trading.

Whoever recommends whatever

Nothing beats self confidence

Arrogance esteem or self beliefs supreme?

There's no need to reveal where stands ZL

GOODLUCK & HAPPY TRADING