Trading Time Frame Selection
Well, I’ve had a frustrating week. No opportunity to trade until Friday, and no opportunity to work on my website and newsletter service. NOT HAPPY!!!
But hey, that happens to all of us from time to time. Life has a habit of not consulting us before playing with our plans.
What happened? Well, before he was a merchant, he used to work as a pilot, with a specialty in aviation safety. I have maintained a link with that industry and still work part time. It’s usually not a big deal at all, and I can fit it into my life. Sometimes, however, a small crisis occurs (safety is like that!) and I have to travel far, and well… my plans don’t matter anymore.
Yes, I know. I have no one to blame but myself. After all, I choose to do this. And this probably has no relevance to your life. So let me cut to the chase: how does this story relate to the title of this article? ‘Selection of trading time frame’.
Ok, those of you who have been on my website for a while know that day trading is my thing. I like short deadlines. Anything more than 5 minutes is too much for me. Why is that? Well, several reasons really:
1. More action.
2. Tighter stops (I hate big losses).
3. Psychologically, I’m a bit of a control freak: I like to monitor a trade from start to finish.
4. I can sit in cash when I’m not trading, so it’s no problem if I get called and can’t trade for a day or two.
Really, it’s all psychology!
I used to trade daily charts several years ago, and really hated the ‘surprise’ each day when I woke up to see what the US market had done to my position overnight. Now when I am trading I can manage the trade closely. And when I’m not trading, I’m out of the markets. Easy!
Day trading fits perfectly with my psychology. And it turns out that it also suits my lifestyle, because if I have to leave quickly, I won’t leave open trades in the markets.
For some strange reason, about six weeks ago, I decided I should look at the daily trading charts again because that would give me more time to work on the trading education website and newsletter. I decided to trade stock options, which would allow me to trade defined risk and profit from falling theta. Great plan! So I sat around simulating trading for a couple of months, just to make sure it would work for me. Well, everything was going well until this week.
Suddenly, I couldn’t control my trades. I’m left in the market with an overall positive delta portfolio and no access to a computer to adjust trades, and the Dow drops 358 points. It’s not a big deal really, since it’s a simulation. The position had been profitable, and is now only slightly losing, so with three more weeks to expiration, there is still a great chance to get out of trouble. Of course, if it had been live, I would have called my broker and closed all the positions.
But here is the real lesson for me:
1. The daily charts do not match my lifestyle.
2. The daily charts do not match my psychology and
3. The daily charts do not match my risk tolerance.
I didn’t feel comfortable holding positions at night when I couldn’t monitor them. And all the ‘speed’ (or lack of speed) in the game frustrated me. Could I get used to it? Absolutely! But why bother when I’ve already found my niche? I am a day trader. Why try to change?
So what is your perfect time frame?
The only way to find out is to try the different alternatives. These days, you can get a demo or simulation platform for almost every market and timeframe. So there is no excuse not to try out the different time frames to find the one that fits your psychology like a glove.
Try short terms for a couple of weeks. Try the intermediate time frames for a month or so, say the 1 or 4 hour charts. Try the daily charts for a couple of months. While you’re at it, try the weekly charts.
What first attracts you is not necessarily the right one for your psychology or lifestyle. When I first started trading, I traded on the weekly stock charts. This quickly changed to daily charts. And then, over several years, it gradually became shorter and shorter. Maybe I wouldn’t have liked day trading back then, but the thing is, I never thought I’d try anything else. If I had, I could have saved myself years of ‘daily chart’ pain.
So, what are you waiting for? Test their time frames and find the one that’s right for you – the time frame that matches your lifestyle and trading psychology.
happy Trading,
lance beg
© Copyright 2008. Lance Beggs. All rights reserved.