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.

Frequently Asked Questions (FAQs)

How do you read a stock chart's candlestick?

Each candlestick gives you distinct pieces of information about how the stock or ETF behaved during that time frame. The skinny part of the candle is known as the "wick," and it shows you the highest and lowest prices reached while the candle was forming. The thick part of the candle is called the "body." The left side of the body shows you where the price opened, and the right side shows you where the candle closed. Candles may be color-coded to show whether the price closed above or below the open.

Remember, candlesticks can be used for any time frame. Day traders may want to see this information separated by each minute of trading. Traders with longer time frames may use 15-minute candles, daily candles, or even monthly candles.

What charting software should I use for day trading?

The best charting software largely comes down to your personal preferences. You should try a few different services to see which one best fits your trading style, including charts offered by your brokerage, as well as third-party chart providers like TradingView. Key features to look for include a wide range of indicator tools, real-time data, and an intuitive design that's easy for you to navigate.

Why do some stock and ETF charts not move in real-time?

Not all charting software provides real-time information. You may have to refresh the page to continue updating the information you're getting. This type of software may not work for day trading, but traders with longer-term trades may not care about getting minute-by-minute information. They may instead base their trading decisions on how the daily candle closes, for instance.