A note on time frames
The period in question when scrutinizing a chart can be defined as a time frame. Technical analysts often focus on certain intervals, such as:
– Monthly Charts
– Weekly charts
– Daily or End of day charts
– Intraday charts – 30 Mins, 15 mins and 5 minutes
A trader can tailor the time frame to their specific needs. For instance, a high-frequency investor might use a 1-minute chart rather than another interval.
This is a short overview of varied time frames:
Time Frame | Open | High | Low | Close | No. of Candles |
Monthly | The opening price on the first day of the month | The highest price at which the stock traded during the entire month | The 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 |
Weekly | Monday’s Opening Price | The highest price at which the stock traded during the entire week | The lowest price at which the stock traded during the entire week | The closing price on Friday | 52 candles for the entire year |
Daily or EOD | The opening price of the day | The highest price at which the stock traded during the day | The lowest price at which the stock traded during the entire day | The closing price of the day | One candle per day, 252 candles for the entire year |
Intraday 30 minutes | The opening price at the beginning of the 1st minute | The highest price at which the stock traded during the 30-minute duration | The lowest price at which the stock traded during the 30-minute duration | The closing price as on the 30th minute | Approximately 12 candles per day |
Intraday 15 minutes | The opening price at the beginning of the 1st minute | The highest price at which the stock traded during the 15-minute duration | The lowest price at which the stock traded during the 15-minute duration | The closing price as on the 15th minute | 25 candles per day |
Intraday 5 minutes | The opening price at the beginning of the 1st minute | The highest price at which the stock traded during the 5-minute duration | The lowest price at which the stock traded during the 5-minute duration | The closing price as on the 5th minute | 75 candles per day |
The table above indicates that the more condensed the time frame, the greater the number of candles (data points). Depending on which type of trader you are, you must decide on an appropriate time frame.
Data can either be useful or useless. As a trader, it is important to distinguish between the two. For example, long-term investors are better off examining weekly or monthly charts to find desired information, while intraday traders executing 1 – 2 trades daily may look at EOD or, ideally, 15-minute charts. A high-frequency trader may get more out of 1-minute charts.
As a trader, it is essential to select an appropriate time frame. This decision carries immense consequences for your trading success as an effective trader looks for useful information and filters out the unnecessary.
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