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 Applied Materials (NASDAQ: AMAT)
These charts are all produced using the same technical indicator used every
day in this column.
Moving Average Crossovers of 5 and 22 exponential moving averages.
MACD (Moving Average Convergence/Divergence with a 9 and 15 period parameter
Momentum of 22 periods.
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 a 15 minute and hourly chart, AMAT looks great.
On a daily, we still may be bottom fishing, but it still may be turning.
The lesson here is to choose your time frame and stick with the trends of
the market.
