How To Use Multiple Time Frames To Improve Your Online Stock Trading
Yesterday, I mentioned that in evaluating the potential trade in QSII, I looked at the 60-minute, daily, and 15-minute time frames to help make my buy decision. For every trade, I believe it’s important to not just look at a few charts, but 5 charts of the same stock which include:
- 1 or 2-minute candlestick chart
- 5-minute candlestick chart
- 15-minute candlestick chart
- 60-minute candlestick chart
- Daily candlestick chart
I find doing this so beneficial, I devote a single monitor for it.
When you watch multiple time frames,, you’re getting the big picture of the stock or equity you’re trading online. It’s similar to buying a car. Before you drive off, you kick the tires, check the seating, estimate the gas mileage, and make sure it’s the color you want. So why just look at a daily chart, or a daily chart and 5-minute chart? A few benefits of monitoring a larger range of times include:
- Having more opportunities for trading patterns to emerge
- Easier to establish trends (ex. the daily chart may be neutral, so that uptrend you spotted on the 5-minute chart may stall easier)
- Longer time frames can be used to set stops (less noise or volatility)
- Shorter time frames can be used to manage stops near resistance areas
- Stops and targets are easier to determine
During those whippy markets, finding a stock that’s trending can be difficult. Instead of entering on a 5-minute buy signal, and risk getting stopped out quickly, the 15-minute chart could be used. Or, let’s say you see a high probability pattern emerge and, decide to enter with a tight R. You can, by utilizing the 1-minute, or 5 minute charts. It really opens up your available trading setups.
Online stock trading is difficult enough. Using more than one or two charts to watch a singe stock adds to that discipline we all use in trading.
September 20th, 2006 at 11:08 pm
[…] How to Use Multiple Times Frames to Improve Your Online Stock Trading by MrMike […]
September 21st, 2006 at 8:36 am
As a small investor, very useful information. It’s something I can use in the future.
September 21st, 2006 at 11:04 am
[…] I’m done trading for the morning, and thought I’d show how I used multiple time frames to trade one stock in the early session. This securitiy came off of the morning gap list. TEVA, Teva Pharmaceutical Industries Ltd. gapped down .46 from yesterday’s close. […]
September 21st, 2006 at 5:24 pm
My uncle and aunt do day trading. they talk about reading the candles and all that. Thanks for the how to. My How To is up also.
September 25th, 2006 at 8:36 pm
[…] On the 5-minute chart, Core Laboratories put in a quick bottom. The 5, 15, and 60-minute charts were all in a downtrend and the moving averages pointing down. When the first lower high is formed on the 5-minute candlestick a short sell should be executed. Wrong! It’s not that easy. In fact, choosing the direction of your trade is a big part of your battle. Learn to be patient. By looking at the weekly chart, I noticed some trendline support (Looking at multiple time frames helps with the big picture). I decided to let the stock form another pivot, or break the day’s low. […]
July 17th, 2007 at 4:58 am
What moving averages do you use in each time frame?
Thanks
July 17th, 2007 at 2:11 pm
Hi Buck,
I use the simple 20, 50, and 200 ma’s for each time frame.
I often trade in the direction of the 20, and 50 ma’s. There’s much better odds trading with the trend.
You’ll see the 200 ma on a 5-minute chart often act as support or resistance. Works well for setting targets.
December 20th, 2007 at 8:43 pm
[…] chart, but caught the breakout later in the day. I need to remind myself to constantly watch those multiple time frames. I would have been better off using a 15-minute trail stop, instead of the 5-minute on N. Remember […]
February 20th, 2008 at 3:30 pm
[…] You’ll notice, I am trading using the 60-minute this time. Why? Because it’s giving me the best picture. That’s important. Here’s more input on trading in multiple time frames. […]
March 13th, 2008 at 11:57 am
[…] you aren’t using multiple time frames to trade, you’re missing out on the whole picture of what the market is doing. Throw out […]