How vital is the timeframe that you pick for your charts?

[brownsfan019 17]

This past week I've had a bit of a realization, in part to my interaction with james_gsx in the candlestick corner... what you pick for your chart timeframe is so incredibly vital that I think it's easy to overlook.

 

Allow me to ramble...

 

In my opinion, the lower the timeframe you go, the more focused on that specific chart(s) you become. For example, I recently had my ES chart down to a 2000 VBC. For those not familiar with the VBC, a 2000 setting can literally print candles in SECONDS. 2000 contracts traded in a quick moving market is nothing. It's actually quite amazing to take a step back and watch. To see what I mean, turn a 2000 VBC on during the first 30 minutes, the last 30 minutes or around econ news (esp Fed). My point being that I literally could only trade the ES at this level. It required my undivided attention.

 

Now, that was/is not necessarily a bad thing; however, I soon realized that I really narrowed down my potential trading targets to one market. As some here might recall, I used to post about the EC (Euro Fx) and we had a thread about the CL (Crude Oil) going as well. Well, those markets became a distant past with a 2000 ES VBC Chart.

 

So my question/dilemna as I think about my trading biz currently is: is focusing exclusively on the ES with a small timeframe (and many, many trades as a result) more or less advantageous for me vs. kicking up the timeframe on the ES to then open the doors to the other markets once again....

 

There's no quick and easy answer (at least for me right now). It's hard to complain when the ES is treating you well with your current setup; however, this is all about exploiting as many opportunities as possible while they are there. And if I am glued to the ES while the EC and/or CL are producing incredible trading opportunities, what is my cost? Again, not an easy answer and more rhetorical than anything.

 

In the end, I wanted to get this out there so others could learn from my struggles currently to find that balance of exploiting the opportunities as they arise. In a perfect world, I could have a computer do all this for me, and before we go there, I am not interested in that. Whether it's old fashioned or what, I enjoy trading and doing it myself. That may be an opportunity cost that I have to deal with.

 

So I would highly recommend that all traders, seasoned or new, to at least glance at other chart timeframes occasionally so you do not become get a case of 'tunnel vision' as I have.

[enlightedtrader 10]

This past week I've had a bit of a realization, in part to my interaction with james_gsx in the candlestick corner... what you pick for your chart timeframe is so incredibly vital that I think it's easy to overlook.

 

Allow me to ramble...

 

In my opinion, the lower the timeframe you go, the more focused on that specific chart(s) you become. For example, I recently had my ES chart down to a 2000 VBC. For those not familiar with the VBC, a 2000 setting can literally print candles in SECONDS. 2000 contracts traded in a quick moving market is nothing. It's actually quite amazing to take a step back and watch. To see what I mean, turn a 2000 VBC on during the first 30 minutes, the last 30 minutes or around econ news (esp Fed). My point being that I literally could only trade the ES at this level. It required my undivided attention.

 

Now, that was/is not necessarily a bad thing; however, I soon realized that I really narrowed down my potential trading targets to one market. As some here might recall, I used to post about the EC (Euro Fx) and we had a thread about the CL (Crude Oil) going as well. Well, those markets became a distant past with a 2000 ES VBC Chart.

 

So my question/dilemna as I think about my trading biz currently is: is focusing exclusively on the ES with a small timeframe (and many, many trades as a result) more or less advantageous for me vs. kicking up the timeframe on the ES to then open the doors to the other markets once again....

 

There's no quick and easy answer (at least for me right now). It's hard to complain when the ES is treating you well with your current setup; however, this is all about exploiting as many opportunities as possible while they are there. And if I am glued to the ES while the EC and/or CL are producing incredible trading opportunities, what is my cost? Again, not an easy answer and more rhetorical than anything.

 

In the end, I wanted to get this out there so others could learn from my struggles currently to find that balance of exploiting the opportunities as they arise. In a perfect world, I could have a computer do all this for me, and before we go there, I am not interested in that. Whether it's old fashioned or what, I enjoy trading and doing it myself. That may be an opportunity cost that I have to deal with.

 

So I would highly recommend that all traders, seasoned or new, to at least glance at other chart timeframes occasionally so you do not become get a case of 'tunnel vision' as I have.

 

An interesting thread indeed.

 

There is no doubt that the choice of time frame is very important. I've made a simple comparison between ES, QM, ZN, ZI, ZG, YM, ER2, NQ at lower time frames. What I've found is that ES offers the most trading opportunities than any other instruments. I'll be content to be an ES-only trader, at least currently.

 

Don't believe in my words blindly. The charts are there. You can easily find the answer. Really nothing is comparable with ES for scalpers/active daytraders in terms of the number of trading opportunities provided, IMO.

[brownsfan019 17]

enlightened - I will not argue the point that the ES is the best day-trading vehicle, as I agree!

 

BUT, if one can take advantage of many markets vs. being forced into one, I am giving a hard look at what is best in the long run. What I mean is, when the ES is in a junk day (however you define it) the ZN could be providing excellent opportunities. But if you are only looking at the ES, you'll never even notice the ZN trades.

 

Anyways, I think it's a valid point that all traders at some point need to consider. Is it better to look for opportunities over many markets, which will probably require a higher timeframe, or focus on a small number, as little as one knowing that some days that one will just not be providing much?

[brownsfan019 17]

I should have included in the original post that what timeframes you chose can also lead to a 'quality of life' discussion as well. What I mean is, when trading off a 15 or 30 minute chart, you have time to plan your trade out and implement when the time is right. You can take some time and strategize. It's a little easier mentally if you ask me, esp when you compare that to a chart that is printing candles every 20-30 seconds! Obviously there's a big difference there and that might be what the doctor ordered. It's a huge mental drain, for me at least, when taking 100+ trades per day manually. That will really wear you out some days. And then when I look at a 30 minute ES chart from today and see 4 nice trades, 3 winners, 1 small loser and a nice day of profits. Now, I may make more on a scalper method, but then it's a discussion of whether those few extra points were worth it in the end...

[enlightedtrader 10]

enlightened - I will not argue the point that the ES is the best day-trading vehicle, as I agree!

 

BUT, if one can take advantage of many markets vs. being forced into one, I am giving a hard look at what is best in the long run. What I mean is, when the ES is in a junk day (however you define it) the ZN could be providing excellent opportunities. But if you are only looking at the ES, you'll never even notice the ZN trades.

 

Anyways, I think it's a valid point that all traders at some point need to consider. Is it better to look for opportunities over many markets, which will probably require a higher timeframe, or focus on a small number, as little as one knowing that some days that one will just not be providing much?

 

 

I do agree sometimes other markets have large moves when ES is not doing too much.

 

However, the key word here is lower time frame. There is no junk day for ES at lower time frame. A good scalper/active daytrader can always find good trading opportunities at any market conditions. If not, that means the trader is not good enough and he/she needs to work on to make improvements.

 

In the end, there is a trade-off. To be focused on one market can help a trader to be very good at that particular market even though there are some opportunties missed in other markets. Since there are so many opportunties offered in ES, it really doesn't matter that much.

[enlightedtrader 10]

I should have included in the original post that what timeframes you chose can also lead to a 'quality of life' discussion as well. What I mean is, when trading off a 15 or 30 minute chart, you have time to plan your trade out and implement when the time is right. You can take some time and strategize. It's a little easier mentally if you ask me, esp when you compare that to a chart that is printing candles every 20-30 seconds! Obviously there's a big difference there and that might be what the doctor ordered. It's a huge mental drain, for me at least, when taking 100+ trades per day manually. That will really wear you out some days. And then when I look at a 30 minute ES chart from today and see 4 nice trades, 3 winners, 1 small loser and a nice day of profits. Now, I may make more on a scalper method, but then it's a discussion of whether those few extra points were worth it in the end...

 

The choice of time frame is also a choice of life-style for a trader, there is no doubt about it.

 

I prefer to use lower time frame. The reason is simple:

 

Only lower time frame can provide many trading opportunities at any market conditions. If you trade 15 or 5-min chart, there are a lot of junk days in ES. If you trade 50 tick chart, there is no junk day at all in ES.

[Nick1984 10]

I found that I had a similar problem, deciding what time frame to use. I had setups based on longer intraday swings off a 5 minute chart and I'd time entries off pivots and other key price levels using limit orders.

 

Then I started looking at 55 tick charts instead but they move so darn fast that I got whipsawed out of positions very often. For my scalping strategies I started to use 89 tick charts instead and found them much more comfortable. However I was still being whipsawed out of positions much to early. The transition to an 89 tick chart from a 55 tick chart didn't reduce the numbers of entries significantly but it did allow me to fine tune my entries better.

 

I found though that using an anchor chart (5 minute/233 tick) helped a lot more to keep me in the trade if there were obvious trending conditions in the longer time frame chart. I think having a good anchor chart is important as it helps alieviate the "tunnel vision" brown spoke of.

[BlowFish 10]

Absolutely vital. One of the fundamental bits of the trading plan is instrument to trade and time frame to focus on. (maybe with a higher time frame for context and a lower one to trigger entries).

 

Its one of the key things you have control over. Along with position sizing it has a direct impact on risk. (and of course potential reward). I think that's one of the reasons new traders and people with small accounts are attracted to ever smaller time frames. Of course the other key variable is position size but if you are trading 1 lot you cant go much smaller. Its tough they get forced down a particular path.

 

Many other considerations too (lifestyle as you mention...scalping 5 tick charts is demanding & tiring). Its a major decision and not to be taken lightly.

 

Cheers.

[brownsfan019 17]

Absolutely vital. One of the fundamental bits of the trading plan is instrument to trade and time frame to focus on. (maybe with a higher time frame for context and a lower one to trigger entries).

 

BF - As much as I've read that comment in books, newsletters, etc. I never had any luck with that. What I mean is, I could have a gorgeous sell on the 30 min chart, but plenty of chances to go long on the 1 minute. What do you do? I just never had much luck with trying to use a higher timeframe for the overall 'feel' of the market and then using a quick timeframe for when to enter. It's probably a function of me using candlestick analysis as well.

[Nick1984 10]

How liberal are you with your definitions of your candlestick patterns on those really small time frames? In a fast moving market a 55 or 89 tick charts candles are pretty much worthless same with even a 2000v candle. A 1 minute candle can be relatively speaking, a much "longer" term candle than the candles mentioned previously as the candle has more time to form.

[brownsfan019 17]

How liberal are you with your definitions of your candlestick patterns on those really small time frames? In a fast moving market a 55 or 89 tick charts candles are pretty much worthless same with even a 2000v candle. A 1 minute candle can be relatively speaking, a much "longer" term candle than the candles mentioned previously as the candle has more time to form.

 

I am 'flexible' with my definition of a candlestick pattern on smaller timeframes. I would not discount their functionality however simply b/c of a lower timeframe. An additional filter may be necessary though.

[walterw 10]

Nice Thread Brown, I am actually going thru some similar issue on my forex research as time frame really marks a diference on life style as you point out and also on some other technical aspects of trading like making more or less trades per day... kind of trying not to be so scalper on forex, at the same time dont want to get so long term... quite an issue but critical important when creating a new trading aproach... thanks for inputs, very usefull... cheers Walter.

[BlowFish 10]

BF - As much as I've read that comment in books, newsletters, etc. I never had any luck with that. What I mean is, I could have a gorgeous sell on the 30 min chart, but plenty of chances to go long on the 1 minute. What do you do? I just never had much luck with trying to use a higher timeframe for the overall 'feel' of the market and then using a quick timeframe for when to enter. It's probably a function of me using candlestick analysis as well.

 

He he thats why I said 'maybe'.

 

If you want to learn all about multiple time frame analysis and then some check out Drummond Geometry (also known as point and line). Only go down that road if you are prepared to put substantial study in (probably 1000's of hours rather than 100's). It might not make you a better trader but you'll be an expert on multi time frame stuff at the end! Actually he introduced me to several paradigm shifts, those alone where worth it for me. One is his idea of focus, if trading an hourly chart (focus) he will only look at a handful of hourly bars but with daily and weekly for context (gain just a few bars). Certain things must happen on lower time frames for the hourly to do its stuff.

 

There are predictable things that must happen in other time frames for a certain event to occur on your focus time frame. I know this sounds obvious but can you get a 5 minute topping pattern while the 1 minute is still going up?

 

While simply saying I wont take shorts on the 5 minute while the hourly is going up may save some bad trades its not a particularly sophisticated approach. If you look at time frames in a more 'integrated' fashion there is a lot to see.

 

In candle terms imagine what a 60 minute long leged doji looks like on a 5 min. How do you want to be trading a daily WRB if your focus is catching intraday swings? For an hourly trend to finish is it likely to see distribution start on a 5 minute chart? What does a 30 minute 'squat bar' look like on a 5 minute (under certain circumstance this will give great trends back and forth on a 1 minute for example) etc. etc.

 

If you trade 'signals' (nothing wrong with that) you are not likely to see these things or even care about them, and why should you. It is easy to get lost in the whole fractal chaos of "well daily is down but hourly is up and jeez 5 minute is sideways and my 1 minute is saying sell what do I do?"

 

Getting back to the topic one thing that Drummond used to say 'the daily bar is wider than the hourly you know'. He would add that the hourly is wider than the 1 minute just to be quite clear. That's pretty important to take into consideration.

 

Cheers.

[brownsfan019 17]

BF - I get what you are saying, it just never has worked for me. I guess I prefer to focus on one timeframe/chart setup vs. looking at a bunch of different ones and end up getting conflicting signals.

 

As for Drummond... no thanks! A trader friend of mine studied it awhile back and not even sure if he still uses it. Seemed like an incredible amount of work for something you may not even use. Again, probably works for some, but I was immediately turned off.

[BlowFish 10]

Yeah I am always loath to recommend P&L without caveats. There are far far simpler way's to trade successfully for sure. Having said that there are remarkable insights to be gained for the persistent.

 

Actually I was thinking more about the last statement it really is quite important. Daily bars are wider than hourly bars but also there are fewer of them. Well duh.

 

We need to decide how much we want to make on a trade and of course how much we want to risk. This will give a strong hint for a suitable bar size. An alternate approach is to decide roughly how many trades we want to take in a day, we know roughly how many bars we need to make a trading decision. Again this will suggest a suitable time frame also. I guess I am stating the obvious but it never ceases to amaze me how many people overlook the obvious! Of course that's not the case here at traders laboratory!

 

Another old cliche is that charts are the map not the terrain. It requires a different scaled map to get from say Mexico to Alaska than from I dunno the suburbs to downtown.

 

So are you still leaning to drilling down to a smaller time frame?

 

Cheer,

[brownsfan019 17]

So are you still leaning to drilling down to a smaller time frame?

 

The issue at hand for me was to consider INCREASING the time frames in order to trade multiply markets, or focus on 1-2 markets with lower time frames where I can pick off those trades, like you mentioned earlier.

 

And it's hard to say what is best b/c there's so much that goes into that decision. It's easy to sit here now and say, I'll trade off the 15 or 30 min charts and take 1-3 trades per day and have it easy. But the other side of that coin is that creates an INCREDIBLY BORING day. I've mentioned that part of trading before and it's important for me. In the end, it's about making money, no doubt; however, if you can have fun at it as well, why not?! This week was toying with a few different settings and I keep coming back to a 5000 VBC on the ES. With that, I can easily trade it during the day with enough trades to keep my ADD in check. But not so many that I make the broker incredibly rich and my gains get wiped out. In addition to the 5000 VBC on the ES, I have also been looking at adding the Euro and/or Crude Oil into the mix as well. It's really about how much I can manage easily and not miss opportunities simply b/c of the chart setup I have chosen. And if I add in any other market(s), they have to be independent of the US indexes. If I add something else, it must not mimic the ES chart as that's just a waste of space in my opinion. Right now, the Euro looks nice and a good way to diversify my day-trading dollars.

[BlowFish 10]

It's quite a quandary isn't it. On one level I really would like to trade a longer time frame 15 minute bars have a nice 'feel'. They paint quick enough to see some of the daily fluttering but give a good perspective of the main days move. Hourlies really concentrate you more towards the daily move than the intraday gyrations.

 

The idea of trading a more relaxed time frame is appealing. Getting a position on early in the session, setting a decent 'daily swing' size target with a loose trailing stop - then going to do other stuff. (In your case maybe watching other markets! I'd probably go for non trading related pursuits) Maybe check back once in a while to adjust things for how the action is unfolding.

 

In actuality I find however I seem to be somehow draw to lower time frames and quick scalps I think that's where my natural affinity lies. Often I find myself watching the DOM & TS in an almost trance like state! I guess that's the lowest time frame.

 

Cheers.

[brownsfan019 17]

It's quite a quandary isn't it. On one level I really would like to trade a longer time frame 15 minute bars have a nice 'feel'. They paint quick enough to see some of the daily fluttering but give a good perspective of the main days move. Hourlies really concentrate you more towards the daily move than the intraday gyrations.

 

The idea of trading a more relaxed time frame is appealing. Getting a position on early in the session, setting a decent 'daily swing' size target with a loose trailing stop - then going to do other stuff. (In your case maybe watching other markets! I'd probably go for non trading related pursuits) Maybe check back once in a while to adjust things for how the action is unfolding.

 

In actuality I find however I seem to be somehow draw to lower time frames and quick scalps I think that's where my natural affinity lies. Often I find myself watching the DOM & TS in an almost trance like state! I guess that's the lowest time frame.

 

Cheers.

 

Couldn't have said it better BF.

[Dogpile 10]

<<I'll trade off the 15 or 30 min charts and take 1-3 trades per day and have it easy. But the other side of that coin is that creates an INCREDIBLY BORING day. >>

 

I find that the most interesting part of trading is the puzzle of figuring out what type of day it will be and how to implement a strategy to take advantage of it. I could do this without entering any orders. But I have to pay bills so I go ahead and enter the orders. I think focusing on the bigger 'structure' is what traders should focus on -- it will always keep you from getting bored.

[brownsfan019 17]

Just wanted to provide a little update on this topic from my point of view...

 

Ever since conversing in the Candlestick Corner, esp with James_gsx, I've really taken a step back to take a birds eye view of my trading and see where I want it to go the rest of this year and into next. And after conversing with James and looking at some charts, I have to wonder why at times I put myself through the ringer of day-trading.

 

What I mean is, some of these daily charts look clear as day to me. Granted, this is all in hindsight and I've been watching the daily's closer now to see how I would play them if just using those. I don't know what it is, but swing trading futures is a tough pill for me to swallow as I've told myself for years that the advantage of day-trading was no overnight risk. And that's very true, esp in the futures markets where things can get moving around 3am EST some days.

 

The biggest advantages I see of going to higher timeframes (in comparison to a quick 5000 VBC) are:

1) Time to plan and map out the trades.

2) Can catch more of the moves, with less trades (and less commissions).

3) Can play MANY more markets, which opens up some great possibilities.

 

For example, in this thread and this thread, I am discussing the tighter range the YM and ES are in currently. But if you look at a CL chart - you'll see a pretty impressive up-trend going on right now.

 

It's quite a realization however to sit here and think - I could be making more, by trading less. And by less, I literally mean doing some work from about 4:30pm - 6:30pm (if that long), plan the trades out, place the orders and let it be. It's almost like trying to kick an addiction really. I've never really been addicted to something to the point of not being able to walk away, but this could be my crutch. To go from taking over 100 trades PER DAY at one point, to a few trades per week would be a massive adjustment. And one that would require some serious work on my end. I honestly do not know what I would even do with my time during the day! I'd have to get a job or something just to have something to do! Maybe I can go to work for the Browns or something... do something that I would love doing.

 

I digress.

 

For anyone interested or following my little realization journey here, I am currently on 15 minute charts with the ES. That's not a typo. I love VBC's and I sometimes throw one up for the sake of it, but this realization that less can be more (and quite a bit more) has sunk in for me. The 15 minute gives me plenty of time to map out trades and to execute that plan. I'm looking at up to 10 trades per day roughly and 10 is on the high side.

 

So, I am currently on the 15 minute and maybe in a few weeks you'll see me post about going to the 30, then the 60 and then it's off to the daily's. I guess I also think about the fund managers that have made some serious money - when you read interviews with the big boys, you rarely find one that fires off a ton of trades each day. It's more of gathering a position at a good price and then letting it work for days/weeks. And the more I look, the more I see that, esp when you catch a monster move like we have seen in the CL. There is some SERIOUS money being made on the CL with that giant up-trend.

 

The most frustrating part for me is saying to myself ... why didn't I see this sooner? And the answer is that I got so wrapped up in actively trading each and every day that the bigger picture was never considered. And as that focus got more and more intense, I got to the point of trading off a chart that could literally produce candles in under 10 seconds (2000 VBC on the ES). Talk about stress and being forced to make a decision in seconds... :hmmmm:

 

I realize that TL and other sites discuss active trading mostly, but I may have to find a new home for position / swing traders. I wonder if there are forums that cater to that type of 'trader'. If that's even being a 'trader' at all. :rofl: Maybe there would be some interest here and James can open up a Position / Swing Trading area for those that aren't interested in playing the intra-day gyrations (and I don't blame you now).

[james_gsx 16]

John Carter swing trades, and he has a pretty fat portfolio. But by swing trading he's able to look at several markets including forex, so when the main indexes are out of whack he can just go trade the USD and Euro - or wheat, whatever. I'm not promoting his website, this is just what I've gathered from watching him. The real question comes in what size of an account do you need to do longer swing trades? Certainly a smaller $20,000 account and one bad day you're out. But the reward side of that can be huge. For example one contract of CL and you hold it for a few dollars and you've pretty much made your month. And a $2 in CL is not hard to accomplish with the latest bull trend.

 

What about instead of the actual futures contracts themselves, what if you could swing trade the options?

[Nick1984 10]

I've noticed that on his site he's been talking more and more about hedging his grains and metals with options on futures because leaving an open position of a commodity futures overnight is highly risky. Just as easily as you can make your month with a great move in the AGS a nasty gap open against you one day can equally make a bad month!

 

Personally I'd say that to effectively swing trade you wouldn't want to have less than $50k in an account and at that level you'd still swing trade only 1 contract or maybe 2.

[brownsfan019 17]

What about instead of the actual futures contracts themselves, what if you could swing trade the options?

 

James,

In terms of swing trading, there are many possibilities - the ETF's, options and futures. I've traded stocks/etf's and options before and while that is an option, the best bang for your buck is on the futures no doubt. Of course, like you said, that's a catch 22 as well.

[Guest cooter]

It's quite a realization however to sit here and think - I could be making more, by trading less. And by less, I literally mean doing some work from about 4:30pm - 6:30pm (if that long), plan the trades out, place the orders and let it be. It's almost like trying to kick an addiction really. I've never really been addicted to something to the point of not being able to walk away, but this could be my crutch. To go from taking over 100 trades PER DAY at one point, to a few trades per week would be a massive adjustment. And one that would require some serious work on my end. I honestly do not know what I would even do with my time during the day! I'd have to get a job or something just to have something to do! Maybe I can go to work for the Browns or something... do something that I would love doing.

 

I'm sure your current brokers would just love you for doing that. That means you'd have to consider trading new markets just to keep up your daily R/T volumes for your discount.

 

Then again, since you're a former stockbroker, why not just get your Series 3 (if you haven't already) and go work in, say, Columbus for OEC? That'll keep you busy during the day for sure....

[brownsfan019 17]

I'm sure your current brokers would just love you for doing that. That means you'd have to consider trading new markets just to keep up your daily R/T volumes for your discount.

 

Then again, since you're a former stockbroker, why not just get your Series 3 (if you haven't already) and go work in, say, Columbus for OEC? That'll keep you busy during the day for sure....

 

I'm not worried about the commission discounts. If they need adjusted, they need adjusted. Of course, I'll prolong that as long as possible.

 

Not moving to Columbus though, that's for sure. Not about to leave everything in Cleveland just to work somewhere that is to help kill the time.