Choosing the Best Day Trading Chart Time Frame

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Graphic trading charts can be based on many time frames. Some even use non-time-related measures such as the number of trades made or their price range. It can seem like a daunting set of choices. If you trade prudently, picking the best time frame or other variable for a certain trading style and type of asset becomes very simple.

How New Traders Choose a Time Frame

Like many new traders, you can spend days, weeks, or even months trying every possible time frame or parameter looking for the one that makes a profit. You may try 30-second charts, five-minute charts, for example. Then you try all the non-time-based options, including tick charts and trading volume.

When none of these makes a profit, you may think you made an incorrect choice and try them all again, assuming you must have missed something the first time through. When you still don't find a profitable choice, you adjust your trading system or technique slightly and then try all of the time frames again.

The thinking behind this dogged effort to choose the right chart time frame or other trading parameter is faulty. It's that each trading system or technique—and probably every market, too—has one optimal time frame or other variables that it will work best with.

If that belief sounds reasonable to you, then be careful, because you may be about to enter the never-ending time frame search from which many new traders never emerge.

How the Pros Choose a Trading Time Frame

Professional traders spend about 30 seconds choosing a time frame, if that. Their choice of time frame isn't based on their trading system or technique—or the market in which they're trading. It's based on their own trading personality.

For example, traders who tend to make many trades throughout the trading day might choose a shorter time frame. Those who typically make only one or two trades per trading day might choose a longer time frame. Traders may also switch their time frame on a given day, depending on how actively they're trading.

The reason professional traders do not spend endless amounts of time searching for the best time frame is that their trading is based on market dynamics, which apply in every time frame. The levels of supply and demand affect prices.

Why Time Can Be Irrelevant

When evaluating a certain time frame with regard to your trading method, a price pattern that has significance on a two-minute chart will also have that meaning on a two-hour chart. If it does not, then it is not a relevant price pattern.

If your trading system or technique is not making a profit, there is nothing wrong with the time frame. The fault is with your trading system or technique.

Trading Charts Based on Factors Other Than Time

Trading parameters that are not based on time should generally be used only with trading systems that are meant to use them.

For example, a trading system may be created using a 100-tick chart. That is a specific system with a move occurring after 100 transactions have taken place.

If a trading pattern is based on the size of a price move, then time doesn't matter. You should select a chart such as a Renko chart, which lets you base the chart on price movement. It gives the trader a simpler view of patterns, trends, and factors like price reversals that occur during the course of the trading day.

There is nothing wrong with using non-time-based variables if that's what you prefer. They may be more visually appealing to you and thus easier to read. Just don't assume that any single chart style gives you an inherent edge.

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