Time Frames

Graphical trading charts can be based on many different time frames.

These time frames can range from months to minutes/seconds and each one of them is used for a specific reason when trading.

For example, if we want to invest for the longer term, generally speaking we would be looking at daily, weekly or monthly charts to decide our entry/exit points We would also look at charts to analyse the trend of a particular instrument. If on the other hand we are looking at a shorter period of investment time frame which can be intra-day trading for example, traders would generally look at hourly or minute charts.

Any type of chart can be created using different time frames however the most common one’s are the following:

Monthly/Weekly/Daily time frame: generally used for long term trading (months to years)
8 hourly, 4 hourly or 1-hour time frames: generally used for medium term trading
30- or 15-minutes time frames: generally used for short term trading
5 minute or 1-minute time frame: generally used for very short-term trading (scalping)

Each time frame is used by different type of traders with styles ranging from having holding periods of months or years, all the way down to mere minutes. As these holding timeframes get smaller, the focus typically shifts from evaluating a stock’s fundamentals to gauging short-term technical indicators.

The below are the four different styles used for trading and the generic chart time frame used:

a) Position trader: trading generally spans between a period of months to years (Daily/Weekly/Monthly)
b) Swing trader: positions are normally held for a period of days or weeks in an attempt to capture short-term market moves (Hourly/Daily)
c) Day trader: positions are entered and exited on the same day. All trades are closed by the end of the trading session using a profit target, stop loss or time exit. (Minutes/Hourly)
d) Scalp trader: positions are generally held for a period of seconds to minutes. (Minutes)