How to Use Charts to Understand Time Frames for Day Trading

How to Use Charts to Understand Time Frames for Day Trading

Time frame is an important aspect for online trading of shares on any particular day. This is because day trading carried out in a proper time frame brings in rich dividends. It requires experience in choosing the right time frame, and new traders can go wrong in doing so. The time frame is nothing but the time interval depicted by the charts with regard to share price movements in daily, weekly, monthly, or yearly modes. But what the day traders need is the time frames within a day, i.e., intraday time frames to buy or sell their shares through a proper balance between risk and return.

This article presents the characteristics and usage of charts with different time frames that can be used in day trading activities. 

60-Minute Time Frame

Traders who prefer short-term to medium-term gains make use of this time frame. They trade between a few days to some months to profit from the share price movements. Such traders can also use this chart interval in combination with other lower chart intervals, thereby going for multi-time-frame analysis. Since the time frame is adequate, a reasonable time is available to keep the selected stocks on the watch list.

15-Minute Time Frame

This time frame is just one-fourth of the 60-Minute time frame. Here, day traders focus on many types of stocks on a given day.  A disadvantage of this time frame is that it may not be possible to keep track of all the stocks that may pop up on the screen in such a short time interval. Hence, day traders may not be able to zero in on the promising stocks.

5-Minute Time Frame

As the name suggests, the chart interval is just five minutes. Hence, traders can focus only on very few stocks. This is because it is problematic to focus on numerous highly volatile stocks. This time frame is particularly useful in the first hour of a trading day in which stocks can be analysed and orders (buy/sell) can be prepared.

1-Minute Time Frame

This time frame is the lowest in a chart interval. Thus, analysing a stock in a minute requires a high level of discipline, coupled with the experience of understanding the market structure. It means that day traders need to keep track of the movements of highly volatile stocks on the previous day. On the next day, in a minute’s interval, they can open trading on stocks with low risk and having potential for high returns.

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Time frames in charts play a significant role for day traders who trade from charts in their day trading activities. If the time frame is lower, the trading frequency would naturally be higher. Hence, there is a higher risk that a trader chooses the wrong stock. Hence, a new trader should initially select the time frame based on their expertise, the desired trading frequency, and suitable time preferences. The advantage of 60-Minute or 15-Minute time-frame charts is that share trading can be done using a mobile device. On the other hand, share trading can be done only through trading systems or hotkey trading when 1-Minute time frame charts are considered.