choosing a chart periodicity?

[JeffPritchard]

Newbie here...

I've been reading about all the many indicators and how to use them.

One thing I've seen in trying to look for these indicators on real charts (instead of the example charts shown with the explanations) is that signals to buy or sell a pair vary from one way of viewing the chart to another. For instance, quite often a buy signal when viewing a 30 minute chart turns into a sell signal with the same indicator when viewing at 4 hours per candle.

How do you decide? What periodicity have you found to be most illustrative for intra-day trading?

Same question for intra-week trading?

Does the answer vary with which pair it is? Does it vary depending on what indicator or chart pattern you are looking at?

 

[Enivid]

The smaller the timeframe the faster the signals change and react to the real-time price action. So the solution here is to take into account the planned holding period and the amount of signals you would want to trade per period of time.

 

[JeffPritchard]

Thanks; yes, I get that.

My question was more one of looking for experience from the members in terms of which relationship between "candle period" and "round-trip time" seems to be the most reliable.

Let's take this intra-day example:
1) the 1 minute, 5 minute, and 15 minute chart of some indicator is giving a buy signal, but the 30 minute and 1 hour and above are not (yet) showing anything.
2) I buy based on the faster indicators
3) I get stopped out because it turns out the "signals" were just noise -- or -- I sell an hour or two later and make a few pips

So for intra-day trading, have you found the really short (minutes) period charts to be useful for buy and sell signals, or are they more often than not just like flipping a coin and don't really mean anything?

Maybe you have found it best to use maybe hourly to decide to act on a day trade, and then maybe 15 minute to time the entry and exit?

I'm just asking for info on the experience of the community on this topic to shorten my learning curve.

Maybe I'm off in the weeds with the above, or maybe I'm close but you have seen better results with this strategy and a slightly different choice of which periods to use.

thanks much!

 

[Easy Trader]

There is no specific answer to your question unfortunatley.... Welcome to trading. This is exactly why there are soooo many different strategies out there. Many which as you wondered do utilize scaling in and out TF for signals and entry/exits etc. In short the higher timeframe in my opinion will always trump the lower one, the larger TF candle contains a larger snapshot of the buying and selling and may be a prelude to buying/selling behavior in the near future. It depends on the system being traded really. A idea would be to backtest your strategy with just the one TF signals write down win/loss on a note pad. If you want to get a better W/L ratio then say filter those previous trades with the signals that were in confluence with signals from a TF higher etc.etc. If you do this and if your system is any good you will probably end up with about 1-5 very high probability trades a MONTH.

 

[eyeball]

Generally speaking, in charts with coincdental starting times, *(i.e. a 1 Hr. chart starting at 1000 and a 2 Hr. chart staring also at 1000) chart of the longer trade time will generally be more accurate over the time period . I say "generally " becuase it can vary according to whether or not the two charts are in sync. with each other ( both in Boli. or both out Boli.bands) plus a number of other in sync. /out sync. indicators too numerous to mention in this post, Be careful of charts having differennt start times with identical ending times. They can present some knotty problems that defy easy analysis.

 

[JeffPritchard]

Generally speaking, in charts with coincdental starting times, *(i.e. a 1 Hr. chart starting at 1000 and a 2 Hr. chart staring also at 1000) chart of the longer trade time will generally be more accurate over the time period . I say "generally " becuase it can vary according to whether or not the two charts are in sync. with each other ( both in Boli. or both out Boli.bands) plus a number of other in sync. /out sync. indicators too numerous to mention in this post, Be careful of charts having differennt start times with identical ending times. They can present some knotty problems that defy easy analysis.

It is interesting you should mention that. Part of what led me to post this but which did not make it into my question related to how long of a period to look at to decide if something is trending up or down.

For instance, looking at recent EUR/USD (all ending on last Friday as I write this), as you move from minute charts (slight upward trend last day or so) to 30 minute chart (trading range in August with a breakout to the upside second week of sept) to day chart (breaking out of a long downward trend) Each time, you go up in length, TWO things are happening, one "good" and one "bad". You are "opening up more time in which there might be a trend or pattern to spot" (good?) but you are also looking at stuff that is further back in history and perhaps less relevant to what's going on right now (bad?).

I guess I am hoping that the experience of the members can help me to lock in on some sweet spot in between that seems to show enough time that you're not missing something important, but not paying attention to ancient history that will cloud your judgement.

Obviously, if there are any sweet spots, they would be different for different types of trading (in and out in an hour, in and out in a day, in and out in a week, in and out in a year)

I'm guessing that many traders have developed for themselves such a "sweet spot", if only as a habit rather than realizing what they are doing and actively choosing certain periodicities as an actual strategy in specific situations.

That more "rule of thumb" sort of idea -- "I seem to have the best luck when I use 1 hour charts for my day trading" answer is what I was hoping to gather a few of to give me a place to start from.

Thanks!

 

[ElectricSavant]

Many of the older indicators were written for the daily timeframe.