One of the frequent questions I’m asked is “What’s the best time frame for day trading?
This video and article walks you through the process of making that decision, and it will surprise you!
Many traders believe there’s a specific chart time interval that will produce more profits than another time interval. The truth of how to determine the best time frame when day trading stocks (or any other market) is not about that.
Enjoy the video and please leave your comments below.
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Hello my friends. This video on day trading stocks is given to you by me, Doctor Barry Burns at Top Dog Trading. And I am going to show you a technique today that you probably haven’t seen before. And it is game changing. So here we go.
How do you determine what’s the best time frame (interval) for your charts, whether you’re day trading stocks, Forex or future?
You know I’ve been trading for 49 years and I’ve seen the markets change a lot. And one of the things that has changed most dramatically is with the advent of various computer technologies into the trading arena.
WHY DON’T THE OLD DAY TRADING STRATEGIES WORK ANY MORE?
For example, now everybody has direct access to the markets. Also commissions have come way down. So the price of entry and exit is less. High frequency trading has come in, algo trading, decimalization and all this adds up to allow people to get in and out of positions faster, and make money.
The effect that that has had on trading and on chart is that charts have become choppier. And people ask me this, hey does it seem like the markets are more chaotic and choppier than they used to be and answer is absolutely yes. We don’t see trends as much as we used to. Specially when you’re day trading stocks for day trading. You got to be in and out during the day.
For example, and you can check up all the examples you want. I know this is just a few, but this is very common and representative. So look at this, the market really doesn’t go anywhere this whole day. This is the day between there and there. and does it go up? Does it go down? No. pretty much goes sideways.
the next day, we come down. Yes we start in a down move. That’s not really a trend, that’s just a thrust to the downside. And then what happens after that. Do we get a trending day? No. after that, after first whatever half hour, hour, the market just goes nowhere from there. again, pretty common.
What happens the next day? well again, kind of the same thing. We get a thrust up, that doesn’t sustain to the upsides, so the trend doesn’t sustain. One thrust down and there is no more trending to this market at all. Thrust up thrust down, and then just goes sideways. No sustained trends. No sustained direction.
Same thing here. We get little bit of a move up. Now here we get a 3 wave pattern which should qualify as a short term trend but it starts the day before. So for a day trader, we’d have to start here, and after this point there’s no trend that continues.
And then in the afternoon, well one of my other youtube videos, talks how to take the afternoon trade and that’s the afternoon trade there. we usually get a move right in after lunch. But that’s not really a trend either. That’s just one thrust. So you look at your cycles for a trend to go, you got to have atleast 3 to 5 cycles going to make it a sustained trend based on the definition of trend.
YOU MIGHT AS WELL TAKE THIS FREE GIFT
Oh by the way if you want my cycle indicator, I do make that available to my youtube subscribers for free. just subscribe to youtube and send me an email also. And Here is my email address, and I will send you the Cycle Indicator. We do webinars on that pretty frequently.
Now let’s finish up with this and show you what I mean. Here we did get a 5 wave down trend, which would qualify but it’s interrupted by the middle of the day, so by the time you are starting as a day trader, it doesn’t sustain anywhere and then it tries to go to the upside. We get little 3 wave trend. But again not a long sustained trend. And then the final day here, it’s just sideways.
Right, so what do we do about this? Is trend trading dead for day trading stocks? Well the answer is no. There is a way around this. So First of all you can go to shorter term timeframe. Now you could try a 2 minutes chart or even a 1 minute chart; it still wont work as well as what I am going to show you now.
YES, BUT WHAT’S THE BEST TIME FRAME FOR MY CHARTS?
The optimal way to accommodate all these changes that have occurred is to go to Tick charts. And tick in this context, is a trade. As we’re pulling of, see here is the same chart that we just looked at. Right? And look at the trend. See, it’s the exact same market.
All we’ve done is to change it to tick charts, and tick bars I should say. And we see these trends. Now what this is, these bars are lasting shorter than 5 minutes. so we are looking inside, I call it the fractal energy. Sort of the fractal of what we’re looking at before. It’s a smaller scale. It’s doing that. That’s number 1.
Number 2 is that we are not using time based bars. Each one of these bars can last a different amount of time. Each bar last for 300 trades. And when trade 301 comes through, then the next bar forms. What this does is it tends to create smoother chart patterns. It creates a more rhythmic pattern.
You’re incorporating volume into the trade pattern as well. It’s not actual volume because it’s really just the trade, and each trade can have a different amount of volume. but you are still taking the former volume in the sense of how many trades are coming through.
That same market that was so choppy before, now all of a sudden we can do trend trading on it.
For day trading stocks, the answer to “what’s the best time frame for my charts” is some interval of tick bars.
Let me go back, and actually I’ll show you couple of different examples here. I don’t want to move the screen around a lot. You are still going to get some chop by the way. right, you are still going to get some chop. Because sometimes that’s just what the market is doing. It’s being chaotic.
But we are still on the same day. and here we get a nice 7 wave trend. Basically you look for this in the morning. And then the lunch is going to be choppy normally, and then in the afternoon. This is your morning trend, that’s your midday chop and that’s your afternoon trend. And that’s the type of thing you will typically find.
Try it out. There is no best number of tick intervals by the way. I do have an article on that at my blog if you are interested in what’s the best time frame for your charts. Feel free to email me and I’ll send you that article. I’ll be happy to share that with you for free. so that’s it for this particular video.
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