If you’re just a beginner and have started foraying into the world of trading and investing, you might have heard of the term ‘intraday trading’.
‘Intraday trading’ is also known as Day trading. Since the inception of the internet and especially discount brokers, day trading has seen a huge surge in the number of traders that complete their trade(s) within a day.
Almost all intraday traders take up their position by seeing the candlestick charts and analysing the patterns that the price action forms. While patterns are mostly formed with the candles that the price action forms, it is essential to note that the longer the timeframe you choose, the less number of candles are formed.
Timeframes are essentially the time periods or resolutions where the candles depict whether the bears are strong or the bulls are stronger. So for example, if you’re an investor who’s looking to invest in the market from a long term perspective, you might want to consider looking at the monthly or the weekly chart.
Couple of Tips
Let’s start with some tips first.
If studying a chart for the first time then it is recommended to check the daily and the weekly chart first. You can map out the strong support and resistance level before moving into the smaller time frames.
Next, find out the trend in the daily/weekly chart. Not only this will help you to be cautious of the support or the resistance level that the price action is near at, but it will also help you to know where you want to go long or go short.
Time frame based on strategies
Below are a few strategies which normal traders use in their day to day trading.
Trading Based on Patterns and Price Action
For traders who prefer drawing patterns on the charts and trendlines, then it is best to utilize the 5, 10 and 15-minute time frame for this. Remember the higher the time frame, in this case, the more accurate the pattern can be.
If, however, you’re an experienced trader who likes to be ‘involved’ at the moment, the 1 min chart can also be helpful.
Trading Based on Scalping Technique
Scalping is another way of profit booking. Many established and cash-rich traders prefer using this technique instead of the above one. Scalpers trade on candles rather than patterns meaning that they wait for gains in points rather than whole numbers and prefer to exit their position within minutes or even seconds.
For that reason, a 1 min or a lesser time frame chart would suffice for them.
Time frame based on indicators
If you actively use lagging or leading indicators for your trades then here are the time frames you should follow:
For intraday purpose, if you’re using a lagging indicator (like MACD, Bollinger Bands and so on) then it is advised to use a 5 min chart. A 1 min chart can also be considered in this case however note that the accuracy might get affected.
If in case you prefer using leading indicators like stochastic or an RSI indicator, then it is recommended to use a higher time frame rather than a lower one. This is because, in lower time frames, there are high chances that the stock may instantly go into an overbought or an oversold zone making you a scalper rather than an intraday trader.
However, if you’re a scalper who prefers indicators then for a leading indicator, you might want to use a 5 min time frame chart, whereas for a lagging indicator a 3 min time frame chart would also do.
We hope you like this strategy and try to implement it the next time you take up a trade.
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