We discuss about what is technical analysis , assumptions in technical analysis , the chart types of technical analysis and candle stick anatomy in the last posts . Today we are going to discussion about time frames .
A time frame is defined as the time duration during which one chooses to study a particular chart. Some of the popular time frames that technical analysts use are:
o Monthly Charts
o Weekly charts
o Daily or End of day charts
o Intraday charts – 30 Mins, 15 mins and 5 minutes
One can customize the time frame as per their requirement. For example a high frequency trader may want to use a 1 minute chart as opposed to any other time frame.
Monthly Time Frame :
Open :
The opening price on the first day of the month
High :
Highest price at which the stock traded during the entire month
Lowest price at which the stock traded during the entire month
The closing price on the last day of the month
12 candles for the entire year
Monday’s Opening Price
Highest price at which the stock traded during the entire week\
Lowest price at which the stock traded during the entire week
The closing price on Friday
52 candles for the entire year
Low :
Lowest price at which the stock traded during the entire month
Close :
The closing price on the last day of the month
No. Of Candles :
12 candles for the entire year
Weekly Time Frame :
Open :
Monday’s Opening Price
High :
Highest price at which the stock traded during the entire week\
Low :
Lowest price at which the stock traded during the entire week
Close :
The closing price on Friday
No. Of Candles :
52 candles for the entire year
Daily or EOD Time Frame :
Open :
Opening price of the day
High :
Highest price at which the stock traded during the day
Low :
Lowest price at which the stock traded during the entire day
Close :
The closing price of the day
No. Of Candles :
One candle per day, 252 candles for the entire year
Intraday 30 Minutes :
Open :
The opening price at the beginning of the 1st minute
High :
Highest price at which the stock traded during the 30 minute duration
Low :
Lowest price at which the stock traded during the 30 minute duration
Close :
The closing price as on the 30th minute
No. Of Candles :
Approximately 12 candles per day
Intraday 15 Minutes :
Open :
The opening price at the beginning of the 1st minute
High :
Highest price at which the stock traded during the 15 minute duration
Low :
Lowest price at which the stock traded during the 15 minute duration
Close :
The closing price as on the 15th minute
No. Of Candles :
25 candles per day
Intraday 5 Minutes :
Open :
The opening price at the beginning of the 1st minute
High :
Highest price at which the stock traded during the 5 minute duration
Low :
Lowest price at which the stock traded during the 5 minute duration
Close :
The closing price as on the 5th minute
No. Of Candles :
75 candles per day
As you can see from the above as and when the time frame reduces, the number of candles (data points) increase. Based on the type of trader you are, you need to take a stand on the time frame you need.
The data can either be information or noise. As a trader, you need to filter information from noise. For instance a long term investor is better off looking at weekly or monthly charts as this would provide information. While on the other hand an intraday trader executing 1 or 2 trades per day is better off looking at end of day (EOD) or at best 15 mins charts. Likewise for a high frequency trader, a 1 minute charts can convey a lot of information.
So based on your stance as a trader you need to choose a time frame. This is extremely crucial for your trading success, because a successful trader looks for information and discards the noise.
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