SCOTT WELSH TRADING BLOG

Which Timeframe Do You Like?

Which Timeframe Do You Like?

Mar. 25, 2014

It seems like a simple question.

You love trading, you’ve got your system, your account is funded, you’re ready to go. You pull up your chart and…choose what exactly? The sixty minute chart? One minute? A daily chart? How about tick charts? Which one is it?

At the start of my day-trading journey, I wanted minute charts because I wanted to go to work in the markets every day. It really, really bothered me to get all fired up to make my millions and then watch as nothing happened. After about an hour, I got bored and angry and my head started to hurt. How can I make money if I don’t get any trades?

That’s why I chose the 1-minute charts. You want trades? The 1-minute will give you trades! I could sit down and get a trade every day and my setup happened all the time. Beautful! Until all my setups started losing because 1-minute patterns are not very strong. A setup on the 1-minute can be overridden by momentary market emotion quite easily. I would get a lot of trades and I would also get a lot of losers. When you take 12 trades and lose $800, that’s not a fun day

So I moved up to 60-minute charts, where the setups are much more reliable—and infrequent. It’s great to see your trades win off solid set ups. It’s not great when you don’t get a trade for weeks at a time.

In fact, when I first started trading many years ago, I even used daily charts. That’s fun trading, but you may only get three trades a year on some setups. Three trades a year? How do I make a living on three trades a year?

The perfect compromise for me was the 15-minute charts. I get a good amount of trades and the setups are reliable. I personally need several trades a week, AND I need a decent winning percentage. I’m able to get both in the 15-minute time frame.

The question is: what do you like? Or more importantly, what is your life situation? Discretionary traders have to look at this very closely. You may love a System and have absolutely no way to trade it. How do you take a setup at 11:00 if you work until 5:00? Of course, you could quit your job, but is that really feasible?

Or you could trade higher time frame charts. You’d get less trades, of course, but at least you’d be able to take them. This is a huge consideration that most traders don’t think about when they’re starting out.

[Of course, this is where automated trading comes in. If you find a System you like but can’t physically trade, you could get a Robot to do it for you. I think I might have brought this up once or twice in my previous posts.]

But even if you find the time frame that works in your schedule (or hired a Robot to do it for you), you have to be able to handle the losing. How would you feel if you only get one trade per month and it loses? Would that cause you to go into a depression or would you be able to shrug it off and wait patiently for the next trade?

Or what if you find a way to take a lot of trades on a lower time frame? Could you handle a lot of losing trades? I know it’s hard for me to be barraged with a seemingly never-ending series of losing trades. Would it be hard for you? Or would you like the action and know that a series of losing trades only means that a series of winning trades is right around the corner?

To give you a guideline, here is roughly what the Hornet generates each month:

  • 15-minute chart: 15 trades per month
  • 60-minute chart: 3 trades per month
  • 5-minute chart: 40 trades per month

As you can see, it goes from moderate to sparse to frenetic, depending on what time frame you choose. How do you feel about that? Does one number seem to be ideal? If so, that’s where you should start looking for Systems. Keep in mind that you may change your mind, depending on how you handle the losing.

 

In summary, here’s what you need to figure out:

  1. What time frame are you physically capable of trading?
  2. What can you handle psychologically?
  3. Does the System make enough money for you to retire?

Believe it or not, the first two are much harder that the last one.

Finding a System to make you enough money is not that hard to do.

Finding something you can actually trade is the tough part.

 

Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.