Intraday trading, swing trading and options trading is the game of timing your move. Entering the trade and booking profit before the fall is anyone utmost priority. In day trading, every single point matters, especially if trade volume and value are high. The time frame in such trading could be the game changer that you should cautiously choose at the time of trading.
A strategy to be effectively implemented and to become profitable has to be implemented on a certain time frame. Not all strategies are made to work on certain time frame and neither certain time frame is perfect for every strategy. So you need to back test and understand the parameters, which one is suitable for which strategy. To make the best use of time frames in trading you need to understand what is time frame in trading and what tools and techniques you can use for choosing the time frame.
What is Time frame in Trading?
In trading, time frame directly refers to the period of price movement on the chart that you select while analysing the stocks for trading. From minutes to hours, day or week and month, the time frame could be anything you want to see on your price chart.
The time frame shows the momentum in the stock price and trend for that particular period. Different time frames will elaborate the waves in different trends. Traders use different time frames as per their trading techniques like day trading, swing trading or option trading. You need to understand which time frame is suitable for which type of trading and how to choose.
Also Read: How to Identify Momentum Stocks for Intraday Trading: 8 Tips
Different Types of Time frame in Trading
The time frames could be categorised divided into short-term, medium-term and long-term. Each time frame and the duration used have its significance and traders usually take leads from higher time frame to get bigger picture of overall trend. For checking if the reversals are happening, the traders usually watch lower duration chart to see if the existing trend is losing steam or not. You can use the candlestick charts or line charts to analyse the time frames.
Short-term Time Frame:
For an intraday trader, duration of a short-term time frame could range from 1-minute to 60-minute price charts. The short-term time frame is usually used for scalping or intraday trading strategies.
Also Read: How to Do Intraday Trading: Best Stocks, Charts & Strategies
Medium-term Time Frame:
The medium-term time frame could be anywhere between a few hours to daily movement of the market index or individual stock. The medium-term time frame can provide you with a more comprehensive view of price movement with the perspective of trading in short-term trade positions for up to a few days to a week.
Long-term Time Frame:
The long-term time frame is the extended period of trading that can last from many weeks to months or up to years. The investors with the long-term investment perspective use this time frame to analyse the stocks. Positional traders taking the delivery of shares analyse the stocks fundamentally and then use technical analysis to analyse the stock trend to find the right buying levels using the day or month price charts.
Also Read: Things to Consider Before Buying Stocks for Long Term: 10 points
What is the Best Time Frame for Day Trading?
Day trader’s trade-in market during market hours and once the market close they square off their position, netting for either profit or loss. Intraday day trader trade in momentum stocks and use low duration like 1-minute, 15-minute, 30-minuteor 60-minute price charts. You can also use indicators to analyse the short-term movement and trend.
Day Trading or Intraday Trading is a one-day game, which means for the Indian stock market you have the first few hours to pick the right stocks for trading.
Also Read: What is the Best Indicator for Intraday Trading in TradingView
The best way to see the price on a chart is TradingView where you can find various types of charts with customization to analyse the stock price movement with live data feed. For day trading you can select a time frame from seconds to minutes or hours. In candlestick charts, you will get the option to choose from a wide range of time frames and choose the best one.
Best Candlestick Time Frame for Day Trading
However, if you choose to analyse the price on candlestick chart patterns, then you can also choose the time frame tick-by-tick, in which the candle formation on every tick will be visible right on your screen. You get the opportunity to minutely analyse every single move of the stock with the additional feature of applying the technical indicators.
Also Read: Best Candlestick Patterns for Day Trading and Option Trading
However, on candlestick charts, you can apply multiple types of time frames from seconds to days or months. But for day trading 5-minute chart can give better insights about the possible movement in the day. Based on this 5-minute time frame chart analysis you can make the right decision for trading. You can also choose a 15-minute chart for intraday.
When applying the time frame move the cursor on the candle to see the open, high, low and close (OHLC). Analyse the combination of patterns and their formation to find out the short-term trend and identify the trading opportunity based on the intraday time frame.
Also Read: How to Identify Trend in Stock Market: 10 Points to Find Trend
You can also choose a 30-minute or 1-hour time frame on candlestick but you need a few hours to see the formation of hourly-based candles to enter into the intraday trading position should be taken in the early trading hours and wait the rest of the day. Hence, during early market hours, you can see the multiple candles in 5 to 15-minute charts.
Best Time Frame for Option Trading
Compared to day trading, in options trading, you have a time horizon from 1 week to 3 months, as the option contracts expire within this time frame. In option trading, you can choose the time from a few hours to days or weeks, depending on your trading strategy. If the option contract expiry day is about to come, you can pick the minutes or hourly-based time frame.
Also Read: How to Select Best Stock for Option Trading: Points to Consider
However, the option price is highly volatile and can be affected due to various factors like the spot price of the underlying security, volatility, demand or supply in the market and the time period remaining for the expiration of the contract. Hence, choose the time frame that is best suitable for your trading strategy, and time horizon to increase the chances of trades successful.
Also Read: How to Trade in High Volatile Market: Best Trading Strategies
Best Candlestick Time Frame for Option Trading
For options trading, you can choose the candlestick chart patterns with a time frame of 15 minutes to 30 minutes to get the best results. In option trading, the time frame could be shorter or longer depending on the time horizon of the option contract.
Apart from that the time frame can show you the different scenarios of the market as per the type of option you choose to trade. The options can be call options or put options, in a bullish market call options are more active, while in a bearish market, put options are more active. Finally, volatility is a key factor that can affect the movement of option prices.
Also Read: Best Technical Indicators for Option Trading in TradingView
Just like day trading you can use the 5 to 30-minute chart to analyse the current trend and then switch to the long period time frame. In a higher time frame, you can see the irregular or unexpected price moves that are because of implied volatility. But for a longer time frame, the candlestick chart patterns can give you a better picture for trading.
Also Read: How to Read, Analyse& Use Candlestick Chart Patterns for Trading
Best Time Frame for Swing Trading
Day trading or option trading is an intraday and very short-term trading strategy, but swing trading is different from these types of trading strategies.
Also Read: Top 10 Different Types of Trading Strategies in Stock Market
In swing trading you have to hold your trade position for longer days, many be for several days, weeks, months or up to years. Hence, the time frame for swing trading on the price chart while analysing the stock movement would be also according to that.
Based on your time horizon in swing trading, you can pick the daily, weekly, monthly and annual chart for time frames. When you use multiple time frames it will help you to understand the short-term as well as long-term trends of the market or stock.
Also Read: Best indicator for swing trading
However, in swing trading too, on candlestick charts you can use the 5-minute to 15-minute or hourly chart to analyse the trend for the day and find better buying levels. But the best time frame for swing trading would be a daily chart that will give you a better view of the long-term trend.
Benefits of Using the Right Time Frame in Trading
Trading with the right time frame is very important to make your trade successful. For different types of trading styles and strategies, the time frame should be also chosen accordingly while analysing the price movement on the candlestick charts. Time frame has multiple benefitsthat you need to know to make the best use of your trading strategies.
Identify The Trend:Choosing the right time frame for trading helps you to identify the current trend in the market or stock. For intraday trading, youcan identify the short-term or the trading for the day, while for swing trading you can find the trend for the weeks or months.
Improved Trade Timing: When you use the right time frame you will get the idea to choose the right timing to enter and exit from the trade positions. Based on the market conditions you can find the best timing to buy the stocks at the lowest levels and sell the same at the higher prices. If the market is highly volatile, hence timing is very important to enter into risky trades like options.
More Trading Opportunities:Using and analysing the stock movement within a suitable time frame will provide you better opportunities to trade in different types of stocks. You will be able to quick decisions and take the right action, hence you can easily enter and exit into the multiple types of trades with better opportunities in different types of underlying securities.
Better Pace of Trading: Choosing the right time frame as per the trading style and strategies also enhances the speed of trading. As you can take quick actions to enter into multiple trade positions, hence your frequency of trading also increases allowing you to enjoy a more number of trades.
Better Risk Management: Another benefit of the time frame is you can identify the right points to put stop loss or exit from trade positions timely that goes against your expectations. It will help you to minimize such risk and allow you to trade with better risk management in day trading or option trading.
Also Read: How to Manage or Do Risk Management in Options Trading
Prevents from Overtrading: When you use the time frame in trading to analyse the possible trading opportunities in the market. If there is no such opportunity visible in the market you wait for the right timing and opportunity. This not only helps you to trade only when there is a profitable opportunity in the market but also stops you from overtrading practice.
Also Read: How to Stop or Avoid Overtrading in the Stock Market: 8 Tips
Conclusion
The time frame in trading is the period you use to analyse the movement of the market or individual stock price. It could be short-term, medium-term or long-term depending on the types of trading style or a trader adopt.
Short-term trading could be intraday or to as long as several days, while medium and long trading could be swing trading and positional trading.
Also Read: Short Term trading v/s Intraday trading: which one is more profitable
For day trading you can use from seconds to minutes or hourly time frame, while for swing trading and option trading, you can analyse the minutes to hourly or daily time frame. However, for long-term investment, you need to expand the time frame from a daily chart to weekly or monthly to get better insight and long-term trends of stock to get the best results.
Also Read: How to Find or Determine Undervalued Stocks: 10 Best Ways
Trading with a suitable time frame as per the trading strategies will not only help you to trade with better timing and pace but also allow you to identify the trend as per the time frame providing more trade opportunities with better risk management. In technical analysis trading with the best time frame could be a key decision-making point to trade successfully.
Also Read: Top 10 Things You Should Know Before the Stock Market Opens
