Timeframe , Chart set up and Trend duration

Chart set up is one of the important aspect of trading. You can be an Intraday trader, Swing trader, Future or Option trader, but setting up the correct chart is the key to your success. In broader spectrum, it has been seen that traders generally follow, 1min, 2min, 5 min, 15 min, 1 hour, 4 hours, 1day, 1week and one-month candlesticks charts. However, the current market price is same for all of the charts, but the position of the price is different in different timeframe. Traders try to find out the value of the price in different timeframe. Trend of the price plays an important role for profitable trade in this aspect.

Generally intraday traders and scalpers follow 1min, 2min, 5 min, 15 min, 1 hour candlesticks chart pattern and Swing Traders follow 1 hour, 4 hours, 1day, 1week and one-month candlesticks charts. Traders also uses indicators on top of these charts to get a perfect indication about buying and selling. As we all know that all the indicators are visual effects of mathematical derivation of recent past prices, it will also differ with respect to candlesticks (in different timeframe). Eventually, the indicators will show wrong behaviour of the price if you have not set up the chart correctly.

Now the question is which timeframe of candlesticks is best and how to use it? Well, the straight answer to the question is, there is no perfect timeframe for the candlesticks. However it is depending on your intention and perspective. Let me explain it you with an example: Suppose you are a day trader or scalper, so you have only 6 hours to finish your trade. Now if you want to follow a 1-hour chart you have only 6 candles and your analysis will be limited to those 6 candles only. If you follow a 15 min or 5 min candlesticks chart, you will be having almost 24 and 72 candles respectively to analyse and finish your trading. Your analysis have to be correct within those candles only. However, I prefer to have a 2 min candles, as I will be having 180 candles to find out the price moment and the trend both.

I think you will be agreeing with me that, finding out a trend with 4 candles or 24 candles will be lot more difficult and righter price to buy or sell will be even much harder compare to 180 candles. In a 2 min time frame you will be able to see a Flat retracement, a pole and flag pattern, a cup and handle more frequently than any other chart. So, my request is, you can try a 2 min chart for day trading, if you have a successful strategy. To find out the value of the price you can check larger timeframes. Sometimes, I use to check Monthly, weekly, hourly timeframe also, to find out the value of the price. But buying and selling should be done in 2 min or 1 min timeframe basis. Check it out by yourself, next time onwards, it will help you to buy and sell perfectly.

Now I would like to make another point here, every timeframe has its own duration or life (for trend). In my last example I tried to explain it with Intraday trade basis. Meaning, a 1 min or 2 min candlesticks have a trend duration of 1.5 hours to 2 hours, Similarly a 5 min and 15 min chart have a traded duration of 6 to 8 Hours, and a 4 hour or 1 day candlesticks chart have a trend duration of 1 week, and a weekly chart have trend duration of 1.5 months to 3 months and a monthly chart have a trend duration of 12-24 Months. Now what do I mean by 'Trend duration'? A trend duration is a time on which there will not be a major pull back (a small retracement or flat retracement can be seen) and after that duration the stock will take a pull back. Every active trader knows the psychological impact of major pull back and most of the trades behaves wired during the pullback which eventually impact their overall trading.

Long story in short, if you (It dosen't matter if you are a sculper, day trader or a swing trader) want to take a break out or break down on the basis of any time frame, please stick to the trend duration rule and always try to find out the value of the price in a larger time frame. I am sure You will get much clearer picture to buy or sell.

Keep learning keep Trading..........

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