Time Based Charts Versus Price Driven Charts?

[HighStakes 10]

Hello all,

 

Up until now, I have been strictly using 1-minute and 5-minute charts for my day trading operation.

 

A lot of guys, including a guy I know personally, bashes time based charts and accuse them for being random, noisy, etc.

 

This eventually lead me down the path to upgrade to a quality tick feed such that I can explore these type of charts on my own. I`m now in the process of completing an extensive study of range, tick, volume and renko bars across different settings, and I have to admit that I`m less impressed than I thought I would be based on the hype.

 

I still think the 1-minute chart gives a fairly good visual representation of the intraday movement and I don`t think it stands back for any of the others.

 

I will continue studying the 1000-volume, 10-range, 512 tick chart, 13 tick chart, ideally eliminating a few of these and settling with one or two in addition to the 1-minute.

 

There appears to be some added value with these charts and together with the 1-minute they may offer an extra edge, in particular for execution during momentum moves.

 

What are your thoughts and experiences on the subject?

 

I`m currently looking into the crude oil market, btw.

 

Kind regards,

 

HighStakes

[wrbtrader 10]

Hi,

 

If you're profitable while using a type of chart...their jealous you can use a type of chart and they can't.

 

Therefore, I wouldn't even exploring other types of different charts/software (you refer to it as upgrading) unless I wasn't profitable or I felts my profit level could improve if I use something that someone else has recommended. Also, you mentioned you're trading Light Crude Oil futures via the 1min charts especially during increasing momentum...that implies you're day trading and holding your trades usually no more than a few minutes or less.

 

I myself day trade via 2min, 3min, 5min and 15min charts. In addition, I swing trade via 60min and daily charts...position trade via daily and weekly charts. I've tried tick charts...they're OK but too fast for me especially in volatile price action. In other words, I have trade management problems when using tick charts.

 

By the way, I often visit some of my institutional trading pals at their offices...they aren't using any fancy types of charts...they're just using time based charts. Thus, if its ok for them...I'll continue using time base charts and not try to outsmart them in trading via the illusion of using a fancy type of chart. :doh:

 

Hello all,

 

Up until now, I have been strictly using 1-minute and 5-minute charts for my day trading operation.

 

A lot of guys, including a guy I know personally, bashes time based charts and accuse them for being random, noisy, etc.

 

This eventually lead me down the path to upgrade to a quality tick feed such that I can explore these type of charts on my own. I`m now in the process of completing an extensive study of range, tick, volume and renko bars across different settings, and I have to admit that I`m less impressed than I thought I would be based on the hype.

 

I still think the 1-minute chart gives a fairly good visual representation of the intraday movement and I don`t think it stands back for any of the others.

 

I will continue studying the 1000-volume, 10-range, 512 tick chart, 13 tick chart, ideally eliminating a few of these and settling with one or two in addition to the 1-minute.

 

There appears to be some added value with these charts and together with the 1-minute they may offer an extra edge, in particular for execution during momentum moves.

 

What are your thoughts and experiences on the subject?

 

I`m currently looking into the crude oil market, btw.

 

Kind regards,

 

HighStakes

Edited March 24, 2012 by wrbtrader

[roztom 10]

I find that the shorter the timeframe the more noise there is...

 

I trade ES and I try to get a reasonable piece of the days move...

 

I basically use a top down approach.. In addition to longer term Cumulative Volume Profiles I use 30M MP/VP to see structure, where key volume areas are and where we are in the bigger picture - what is the market trying to do, where are the stops on the other side that the market will be attracted to (auction theory).

 

However, my Longterm interday chart is 15m..this is just to see any chart structure developing like a Flag or Triangle so I get a sense of what kind of day we are in..

 

Then I scale down to 1.25 range and then .50 Range or 233 Tic for entry (I call this periscope depth) ...

 

After I get a position on I follow it with a .4 renko, just to take the noise out so I dont get caught up in minutae...

 

I also trade for targets..scale out, etc.

 

My charts are price/volume driven since to me price/volume at price represents trader acceptance or rejection.

 

Time is an element since participants must act within the confines of the session but for me price and volume represents what is perceived as value at any time... perceived value can change and price will respond accordingly...

[HighStakes 10]

Hello wrbtrader,

 

Thank you very much for your insightful reply. It is an added confidence to hear that you and your institutional friends prefer minute charts.

 

I will continue doing some research with this and I have already decided to use the 10 tick range chart in addition to the 1-minute.

 

Good trading to you.

 

HighStakes

 

Hi,

 

If you're profitable while using a type of chart...their jealous you can use a type of chart and they can't.

 

Therefore, I wouldn't even exploring other types of different charts/software (you refer to it as upgrading) unless I wasn't profitable or I felts my profit level could improve if I use something that someone else has recommended. Also, you mentioned you're trading Light Crude Oil futures via the 1min charts especially during increasing momentum...that implies you're day trading and holding your trades usually no more than a few minutes or less.

 

I myself day trade via 2min, 3min, 5min and 15min charts. In addition, I swing trade via 60min and daily charts...position trade via daily and weekly charts. I've tried tick charts...they're OK but too fast for me especially in volatile price action. In other words, I have trade management problems when using tick charts.

 

By the way, I often visit some of my institutional trading pals at their offices...they aren't using any fancy types of charts...they're just using time based charts. Thus, if its ok for them...I'll continue using time base charts and not try to outsmart them in trading via the illusion of using a fancy type of chart. :doh:

[HighStakes 10]

Thank you for your detailed reply, roztom.

 

How`s day trading ES been for you lately, btw? I used to trade ES and have a lot of experience with it, but now want to focus more on CL since it is consistently more volatile, suits my personality better and the hours are a little better since I live in Europe. ES seems to periodically turn into a day trader`s nightmare when the volatility shrinks.

 

Using a renko chart to stay in the trade is an idea I`ve considered myself, but for execution or identifying a swing high or low, I found that it was too slow for me.

 

Good trading to you.

 

Highstakes

 

I find that the shorter the timeframe the more noise there is...

 

I trade ES and I try to get a reasonable piece of the days move...

 

I basically use a top down approach.. In addition to longer term Cumulative Volume Profiles I use 30M MP/VP to see structure, where key volume areas are and where we are in the bigger picture - what is the market trying to do, where are the stops on the other side that the market will be attracted to (auction theory).

 

However, my Longterm interday chart is 15m..this is just to see any chart structure developing like a Flag or Triangle so I get a sense of what kind of day we are in..

 

Then I scale down to 1.25 range and then .50 Range or 233 Tic for entry (I call this periscope depth) ...

 

After I get a position on I follow it with a .4 renko, just to take the noise out so I dont get caught up in minutae...

 

I also trade for targets..scale out, etc.

 

My charts are price/volume driven since to me price/volume at price represents trader acceptance or rejection.

 

Time is an element since participants must act within the confines of the session but for me price and volume represents what is perceived as value at any time... perceived value can change and price will respond accordingly...

[roztom 10]

Agree on the Renko, I just use it for cruising altitude.. I don't want to get distracted by the noise when I am trying to stay with a trade...

 

I also have the 1.25 range which is very effective in the ES for trend/swing..and then the smaller timeframes for execution..

 

I do shoot for targets, scale out, etc..

 

As far as the ES, it is ok to trade.. as long as the range is around 8 - 10 pts or greater. I know there is more volatility in other markets but then the risk is commensurate also... ES works for me... if it drys up in the summer then maybe I will look elsewhere.. However, the current Global enviroment might just keep things hopping..

 

:missy:

[BlueHorseshoe 10]

A lot of guys, including a guy I know personally, bashes time based charts and accuse them for being random, noisy, etc.

 

This might sound like a slightly perverse answer, but it depends on whether you want to make use of noise in your trading or not. If you're a trend/momentum trader then you probably don't - you want to see clean trends that you can follow.

 

If you're a reversion to the mean type of trader then you probably want to see the noise and trade back and forth within it. Breakouts are a bit more complicated to pigeon-hole, in that you want to trade the ensuing breakout trend without the noise, but the market condition that price breaks out from is probably a noisy one.

 

One example of how you can use noise to your advantage is when developing stop-loss strategies. Typically, given a random exit, you can increase the probability of a profitable trade by placing your target within the noise, and your stop outside of it. When the market is then left to do its thing there is a higher probability of your target being hit than your stop. Introduce an entry strategy with an edge, and the probability increases further.

 

Given that you're day-trading crude, however, my guess is that you're probably working with breakouts, in which case range bars could be a useful addition to your strategy. I don't daytrade oil (or any other market), but one thing I have noticed is that the CL contract shows less of a tendency for intra-day reversals than many other markets - once it gets going in a trend, it normally sustains it for a full session. One thing I would therefore begin by testing is the effectiveness of holding positions in CL into the close.

 

Hope some of that is helpful to you.

 

Bluehorseshoe

[gosu 10]

And then there are people who bash charts of any kind to trade from. Bashing in general seems to be endemic to trading. You are right to investigate for yourself.

 

Personally, I like my price bars in time increments, from the 2m to...well that's my little secret.

[joshdance 10]

I will continue studying the 1000-volume, 10-range, 512 tick chart, 13 tick chart, ideally eliminating a few of these and settling with one or two in addition to the 1-minute.

 

There appears to be some added value with these charts and together with the 1-minute they may offer an extra edge, in particular for execution during momentum moves.

 

I also keep my trust 1m up at all times, as well as 5m. It's a trusty, "reality check" glance for me.

 

My main 3 charts now are volume charts though. They show activity, and hide the time it takes to complete that activity. I do not like range bars, as they hide horizontal development which is actually something I want to be aware of, and only show vertical development. Of all bar types, range and renko bars eliminate the most useful information for me personally.

 

I resisted volume charts for a while, mostly because I do like to see how much volume trades in a given time, but I now use a histogram that shows me this information as it would show on a time-based chart. The creator of constant volume charts is on this forum, maybe he will stop by and give some thoughts. You can find some entertaining arguments between he and I from about a year ago.

 

The bottom line though is to use what works for you. Don't let anyone pressure you to use something that doesn't suit your personality and style. It's simply a personal interpretation of a market, and no one else's chart will look just as right to you as something you choose yourself.

[joshdance 10]

I still think the 1-minute chart gives a fairly good visual representation of the intraday movement and I don`t think it stands back for any of the others.

 

I will continue studying the 1000-volume, 10-range, 512 tick chart, 13 tick chart, ideally eliminating a few of these and settling with one or two in addition to the 1-minute.

 

There appears to be some added value with these charts and together with the 1-minute they may offer an extra edge, in particular for execution during momentum moves.

 

One more thing--consider the design principle "form follows function."

 

Many people start with a hundred different options, and then eliminate some. Consider instead thinking about what you NEED first--in other words, what view of the market do you NEED to see? Then pick the chart that best fits that need.

 

There are an infinite number of possibilities of charts, colors, indicators, etc.--many people want to make the chart that looks the prettiest, no matter how useless it is to them. Think about what angle from which you want to see the market's activity, and then pick the tool that best gives you that view. Only add a view if you need it; not because someone else has it and you think their chart looks "cool."

[zdo 20]

Hello all ...

 

 

What are your thoughts and experiences on the subject?

 

 

BlueHorseShoe pretty much nailed it in post #7. I’d add that “Noise” isn’t noise to everyone in the exact same way… so

If, for any reasons, you want/need to see and include inactive times (, congestion, small corrections, and… etc ) in your work, then time based charts are the way to go…

else if you need to filter those patterns and use representations that emphasize movement, then the non time based charting methods are the way to go…

 

Inaccurate filtering, in general, degrades the pattern recog performance of many traders. Joshdance just said it succinctly - “what view of the market do you NEED to see? “

[Tams 20]

my motto...

 

if you don't see anything this way,

check the other way.

 

 

 

if the time charts do not give you the messages,

check the volume charts.

and vise versa.