SELECTING A TIMEFRAME
SELECTING A TIME FRAME
W hen day trading, you’ll obviously select a timeframe that is less than one day.
Popular intraday timeframes are 60-minute, 30-minute, 15-minute, 10- minute, 5-minute, 3-minute, and 1-minute.
When you select a smaller timeframe (less than 60 minutes), usually your average profit per trade is relatively low. On the other hand, you get more trading opportunities. When trading on a larger timeframe, your average profit per trade will be bigger, but you’ll have fewer trading opportunities.
Smaller timeframes mean smaller profits, but usually smaller risk, too. When you’re starting with a small trading account, you might want to select a small timeframe to make sure that you’re not over-leveraging your account.
However, when selecting a very small timeframe like 1-minute, 3- minute, or 5-minute, you might experience a lot of “noise” that is cause by hedge funds, by scalpers, and by automated trading.
You might think that you see an emerging trend just to realize that it was only a short manipulated move and that the trend is over as soon as you enter the market.
Therefore I recommend using 15-minute charts. This timeframe is small enough for you to capture the nice intraday moves, but it’s big enough to eliminate the noise in the market and correctly displays the “true trends.”
When developing a trading strategy, you should always experiment with different timeframes. A trading strategy that doesn’t work on a small timeframe might work on a larger timeframe and vice versa.
Start developing your trading strategy using 15-minute charts, and if you’re unhappy with the results, change the timeframe first before changing the entry or exit rules.