What Time Frame Should I Use On My Charts

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What Time Frame Should I Use On My Charts?

This is a very common question, frequenting popping up in the comment section of articles involving indicators, strategies or trading in general. “What time frame should I use on my charts?” is a good question, but ultimately it depends on your trading style, personality and the type of strategies you gravitate toward. Here we’ll address these issues so you can focus on the time frame that is right for you, saving you from frustration, wasting time and maybe even some losses.

What You Have Time For

In order to determine what time frame to watch on your chart, you must first assess how much time you actually have each to look at your charts. If you only have 20 minutes to check out charts after you have worked a full day and most of the major markets are closed, day trading isn’t a viable option. Therefore, you’ll need to focus primarily on 4-hour or daily charts which allow you to see longer term trends so you can base your trades on those. You’ll most likely have to be a swing trader, or longer-term trader, with trades lasting several days to a few weeks in the latter case.

If you have a few hours during the day to dedicate to your charts, while major markets are open, then you have a few more choices. If you like sitting in front of your computer and actively trading with “your finger on the trigger” so to speak, then a watching a short-term time frame, such as a 1 or 2 minute chart is likely ideal. This time frame will give you the most trade set-ups for the time you have.

If watching every tick of the chart drives you crazy, then you’ll likely want to use a 5 or 15 minute chart. You’ll still likely get some trade signals, but not as many. You’re able to utilize your time effectively, but not drive yourself insane.

It’s worth noting that while some markets like forex are open 24 hours during the week, there are some points in that 24 hour period which aren’t worth trading. If you are trading forex pairs like the EUR/USD or USD/JPY, you want to make sure that either the European and/or US markets are open when trading the EUR/USD or the US or Japanese markets are open when trading the USD/JPY. When at least one of the markets in a forex pair isn’t open, price movements can be very random and thus not ideal for trading.

Trading requires well defined trading plan and strategies. Without a strategy a trader is just throwing darts hoping they hit something–which isn’t viable over any length of time. So hopefully you have come up with or found a few strategies that you like. Likely these strategies are best applied to certain market conditions, certain times of day or to a certain time frame.

Some strategies are easily adjusted to almost any time frame, while others will only work under specific conditions. For example, there are strategies designed specifically for the few minutes surrounding when a market opens. Trying to apply such a technique during the middle of the day is likely to be a losing proposition.

Analyze your strategies and determine what the best time frame is for those strategies. Hopefully what you have time for (section above) and the time frame your strategy requires align. If not, you’ll need to find another strategy until you have more time to dedicate to trading.

No One Time Frame is Perfect

The sections above hopefully helped you narrow down what type of time frame you should be watching. Ultimately though there is no perfect time frame that will suit everyone. Some traders are successful trading off tick charts, while others off 15 minute or daily charts.

This is where I will throw you a curve-ball. It is recommended that you don’t only look at one time frame. While a 1-minute or tick chart may show you a lot of information about very short-term movements, they don’t show the overall trend of what you are trading. A daily chart, may show the overall trend, but isn’t good for picking out intra-day entry points. Therefore it is recommended that traders don’t get addicted to only watching one time frame. Instead, look at two or three time frames.

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Short-term traders can view a 1-minute, as well as a 15 minute and 1-hour or 4-hour chart. The 1-minute provides entry and exit signals while the 15 minute and hourly make sure the trader is acting on more complete information about the trend and support and resistance levels.

Swing traders and longer-term traders may focus on a daily chart, but can also use a weekly chart for providing a larger context for the trend and support and resistance levels. A a 15 minute (for example) chart can also be used for fine-tuning exit and exit points.

Looking at more than three time frames becomes cumbersome, and likely counter-productive.

Since there isn’t a “best” time frame to use on your charts, focus on a time frame that works best for you. What is best for you will depend on how much time you have which in turn affects what type of trader you will be. Then you need to make sure your strategies are aligned with the amount of time you have, and your personality. This will help you determine your “main” time frame, but ideally you should also look at one or two other time frames as well. This will provide you with more information about the asset you are trading, such as which way the short and long term trends are moving, and where important support and resistance levels are.

Choosing the Best Day Trading Chart Time Frame

Graphical trading charts can be based on many different time frames or even on non-time-related parameters such as number of trades or price range. With an essentially infinite number of choices, choosing the best time frame or other variable for a particular trading style and type of asset can seem like a daunting task. But if you are trading smartly, it actually becomes a very simple task.

How New Traders Choose a Time Frame

Many new traders spend days, weeks, or even months trying every possible time frame or parameter in an attempt to find the one that makes their trading profitable. They try 30-second charts, five-minute charts, and so on and then they try all of the non-time-based options, including ticks and volume. When none of them makes a profit, they think they made an incorrect choice and try them all again, assuming they must have missed something the first time through.

When they still don’t find a profitable choice, they adjust their trading system or technique slightly and then try all of the time frames again, and so on.

The thinking behind this dogged effort to choose the right chart time frame or other trading parameter is that each trading system or technique—and probably every market too—has one optimal time frame or other variables that it will work best with. If that belief sounds reasonable to you, then be careful, because you may be about to enter the never-ending time frame search from which many new traders never emerge.

How Professional Traders Choose a Time Frame

Professional traders spend about 30 seconds choosing a time frame, if that, because their choice of time frame isn’t based on their trading system or technique—or the market in which they’re trading—but on their own trading personality.

For example, traders who tend to make many trades throughout the trading day might choose a shorter time frame, while traders who typically make only one or two trades per trading day might choose a longer time frame. Traders may also switch their time frame on a given day depending on how actively they’re trading.

The reason professional traders do not spend endless amounts of time searching for the best time frame is that their trading is based on market dynamics, and market dynamics apply in every time frame.

The Irrelevance of Time

When evaluating a certain time frame with regard to your trading method, a price pattern that has significance on a two-minute chart will also have significance on a two-hour chart, and if it does not, then it is not a relevant price pattern after all. In other words, if your trading system or technique is not making a profit, there is nothing wrong with the time frame; the fault is with your trading system or technique.

Other Trading Parameters

Finally, trading parameters that are not based on time should generally be used only with trading systems that are specifically designed to use them. For example, if a trading system has been created using a 100-tick chart—with a move occurring after 100 transactions have taken place—then a 100-tick chart should be used. If a trading pattern is based on the size of a price move, then time isn’t important and you should select a chart, such as a Renko chart, that enables you to base the chart on price movement.

Having said that, there is nothing wrong with using non-time-based variables. If you prefer them visually and find them easier to read, then go ahead and use them. But beginning traders shouldn’t assume that one of them has some inherent advantage over another or over a time frame format.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

How To Use 1 & 4 hour Chart Time-Frames to Confirm Daily Chart Signals

A common question beginning traders ask me is whether or not I use intraday or “lower time frame charts” and if so, how do I use them?

For the most part, the answer is yes, I do use intraday charts. However, (you knew there was going to be a however, right?) there is a time and place for everything, especially intraday charts. It’s important you understand when to use them and how to use them. This is something I go into much greater detail on in my advanced price action trading course, but for today’s lesson, I wanted to give you a brief overview of just how I incorporate intraday charts into my daily trading routine.

This tutorial will demonstrate several of the core ways I use intraday chart time frames to provide additional confirmation to daily chart signals as well as manage risk, manage position size and improve the risk reward of a trade.

My favorite intraday chart time frames to trade…

Typically, people who email me about the intraday time frames want to know if I ever trade solely off of these lower time frames. The answer is, yes, I sometimes do trade the 1-hour or 4-hour charts on their own without taking into account the daily or weekly time frame. However, 90% of the time I use the 1-hour and 4-hour charts to confirm the higher time frame signal, mainly the daily chart time frame.

In this way, the intraday charts work as an extra point of confluence to give weight to a trade and further confirm whether or not I want to enter it. The other big advantage of the intraday charts is that they can allow me to fine-tune my entry to achieve better risk management. More on these topics later.

  • The most important thing to remember is that I never go lower than the 1-hour chart because from my experience, any time frame under the 1-hour is just noise. As you go lower in time frame, there are increasing amounts of meaningless price bars that you have to sift through and this makes the story of the market cloudier and cloudier, until you reach a 1-minute chart where you are basically just trying to make sense of gibberish.
  • I only look at the 1-hour and 4-hour charts when I am looking at intraday time frames. The anchor chart that I base most of my trading decisions on is always the daily chart time frame.
  • For those who like to look at weekly charts, the concepts in this lesson could be applied there as well. You would essentially use the daily charts to confirm weekly signals and add confluence to them, as well as fine-tune your risk management. It should be noted, I rarely trade off weekly charts alone, but for the die-hard weekly-chart traders, keep this in mind when reading the rest of this tutorial.
  • Remember, it is NOT essential to trade the daily chart with confirmation from the intraday. It’s just something you might want to implement as you become more advanced and have mastered the basics of trading daily chart time frames.
  • Remember, this is NOT day trading! The length of time we are holding these trades is still intended to be a full overnight position or multiple days / weeks. Remember, the initial trade trigger is still the higher time frame chart.

Using Intraday Charts for Second Chance Trade Entries

Everyone hates missing out on a perfectly good trade, myself included. Luckily, there are a number of different ways you can get a good second chance trade entry on a signal you initially missed.

One of those ways is by use of the 1-hour or 4-hour charts to look for a signal a few hours or even days later, to re-enter in the direction of the original daily chart signal that you missed.

In the example below, we see a clear-as-day pin bar buy signal from support in the S&P500, circled in the chart below. If you missed this one, you were definitely kicking yourself…

However, for savvy price action traders, they know a second-chance entry will often present itself on the intraday charts not long after the daily signal fires off. Notice, in the chart below, we see a fakey pin bar combo pattern formed shortly after the daily pin bar. Also, notice there was a larger 4-hour pin bar that formed the same day as the daily signal, adding more confluence to that daily signal.

Using Intraday Charts to Confirm Daily Signals

Sometimes, you may see a potential daily chart signal but you don’t feel convinced. It may not “look right” to you and you feel it needs some more confirmation as a result. This is normal, and it happens often.

You will sometimes then get a 1-hour or 4-hour chart showing a super-convincing signal after the daily one you weren’t sure about.

Notice, in the chart below, we had a bullish tailed bar at support in an up-trending market. But at the time that bar formed, you would probably be wondering if it was really worth taking or not, due to its bearish close and the preceding swing lower.

Intraday chart to the rescue. Notice the two convincing 4-hour pin bars that formed around the time of the above daily chart bullish tailed bar. You could have used these 4-hour pins to further confirm your feeling about the daily chart signal you weren’t sure about.

Sometimes, you will see a daily chart signal forms but does not have any real obvious confluence with a strong trend or key chart level. In these cases, you can rely on a clean intraday signal to be the confluence that you need to either enter the trade or pass on it.

Notice in the daily S&P500 chart below, there was an intense sell off in early 2020. It would have been very tough for most traders to buy right after such a strong sell-off. There was a lot of bearish momentum and pressure overhead and this would have cast doubt on the daily chart pin bar signals seen below.

The 1-hour chart would have helped us in this situation. As seen below, back-to-back 1-hour chart pin bars formed at the time of the above daily signals, indicating further confluence and giving us further confirmation, it was safe to enter long. Also, entering on these 1-hour pin bars allowed a much tighter stop loss and thus better risk / reward profile as will be discussed in the next section.

Using Intraday Charts to Tweak Your Risk Reward and Position Size

As we know, the daily chart requires us to use wider stops most of the time (unless we use the 50% tweak entry as exception), so in most cases, when we use the 1 or 4-hour intraday chart, we can implement a tighter stop loss and adjust position size accordingly. This allows us to substantially improve our risk reward because the stop loss distance is reduced and the position size can be increased as a result, but the profit target remains the same.

This is not going to be the case on every trade on intraday charts, sometimes the risk management ends up being very similar to what it would have been on the daily chart on its own. But there are many instances where it works out to where you can double or triple the potential reward on a trade by utilizing intraday signals.

In the Dow Jones daily chart example below, we can see a clear pin bar signal formed and if you had entered near the pin high with the classic stop placement of the pin low, you’d likely get a 2R reward, POSSIBLY 2.5 or 3R at the most.

The 4-hour Dow Jones chart around this same time, fired off a 4-hour pin bar shortly after the daily pin above, providing us the potential to essential trade that pin bar instead, this reduces the stop loss by about half and allows us to double the position size, upping the reward to 6R max instead of 3R. Maximizing winning trades is essentially how you build a small account into a big one and how you make big money in the markets.

A similar situation in the example below. A nice GBPJPY bearish daily pin bar formed, albeit a pretty wide one. Your stop loss would have been over 300 pips from pin high to low on this one, greatly limiting the potential Risk Reward:

The 4-hour chart fired off a much smaller pin bar after the above daily pin. This allowed us to turn a 1R winner into a 5R or more potential.

Conclusion

The intraday tweaks and ‘tricks’ that I showed you in today’s lesson are just some of the ways I utilize the 1-hour and 4-hour charts with my three core price action trading strategies in my trading plan.

Price action trading does not simply consist of just looking for a few candle patterns on a chart and then placing a trade, not even close. There is a lot more involved. The process of actually finding and filtering trades, managing risk / reward and then executing the trade and managing it both technically and mentally, is something you can’t learn overnight. There is a technical analysis side and a mental side to every trade, and both parts have to be learned and practiced over and over before you truly gain the ability to make consistent money in the market.

After reading today’s lesson, I hope you have a better understanding of how to use the intraday charts properly, unlike most traders. Don’t make the mistake of using the intraday charts to micro-manage your position and over-trade. This is wrong and will cause you to lose money.

Instead, utilize the tips and tricks learned in this lesson and the others I teach in my trading course, to use the intraday charts to your advantage. Trading is about making the most out of a good signal, and this is what I use the intraday charts for, not to over-trade or meddle in my trades like most traders do. I hope you too can now use the intraday charts to your advantage by implementing the theory and concepts in this tutorial to ultimately improve the odds of any given trade working out in your favor and maximize its profit.

What did you think of this lesson? Please leave your comments & feedback below!

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