Larger Timeframe, Stronger Signal

As many of you will have guessed by now, I like to use weekly charts as my main method of looking at the market.  There is a good reason for this, actually many good reasons –

 

  • I only have to scan the market once a week;
  • I get to take part in longer trends;
  • longer trends means more dividends (which is always a bonus);
  • and best of all – the larger timeframe gives stronger signals.

 

Looking at your bar chart you can choose to view one day per bar, one week per bar, one month per bar or even many larger or smaller versions of these.  Now, if you get a signal on a daily bar chart, you will get a trend that runs in days.  So even if it runs for 30 days it is still just over a month (5 days to a trading week), which does not really give your trend room to grow.

 

If you get a signal on an intra-day chart, you will get a trend that lasts in minutes or hours.

 

If you get a weekly signal, however, you get a trend that runs in weeks.  30 weeks, for example, is more than half a year and a solid amount of time to grow a proper trend.  Sure – you will get that 1 in 100 trade that skyrockets as soon as you buy or crashes as soon as you sell short, but these trades are the exception, not the norm.  We are here for the long haul, and most good trends need time to grow.

 

The other side to this is that support and resistance on a weekly chart is stronger than that on a daily chart.  Just like support or resistance on a monthly chart is stronger than a weekly, or dailies are stronger than intra-day.  So whatever time frame you are trading it is a good idea, and something I always do, to check the time frame up from yours to see if there is any impending support or resistance.  This will help increase the probability of your trades.

 

There are many ways larger time frames can help or affect your trading – for example Elliott Wave counts are stronger on larger time frames also.  So when deciding how you are going to trade, always consider the benefits of a larger time frame or at least checking the time frame up from yours.

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June 11, 2009  Tags:   Posted in: Free Trading Course Lesson Backlog

One Response

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