The purpose of this Market Call section is to
educate readers in technical analysis patterns and indicators. As with all investment
information, you need to research information and consult your financial advisor before
initiating any strategies that are contained in Market Call.
Also, you must realize that as with all trading strategies,
opinions can change quickly depending on market conditions and developments.
This column tries to present historical examples, potential set
ups, and examples of entry and exit strategies.
Time Frame
One question that every trader must deal with in trading or investing is Time Frame.
The Time frame is more important than the indicator parameters used by a trader or investor.
The focus of the column is on Day Trading. However, the same patterns, indicators and moving average parameters may be used on 5-minute, 15, minute, hourly, daily or weekly data.
The key is to be consistent in your trading style and risk reward parameters.
A Day Trading stop loss of average profit may be 1 to 2 points. A longer term trader may allow a stock to move 5 to 10 points against him before receiving a new signal.
To demonstrate the concept visually, below find 3 charts of Aetna Inc. (NYSE: AET).
These charts are all produced using the same technical indicator used every day in this column.
1. Moving Average Crossovers of 5 and 22 exponential moving averages.
2. MACD (Moving Average Convergence/Divergence with a 9 and 15 period parameter
3. Momentum of 22 periods
4. OBV (On Balance Volume) Traditional Application
As you can see, the shorter the time frame, the more signals and the quicker a signal will trigger on any of the indicators we use in this column.
On AET, who know what and when!
The lesson here is to choose your time frame and stick with the trends of the market.
