Monthly Archives: January 2014

The Hierarchy of Time Frames

In trading big moves & major directions always remember the hierarchy of time frames:

Weekly > Daily > X hours > X minutes

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Point is, if you don’t want to waste your time guessing every 10 point tick, staring at monitors all day, then you’d be better off just looking at the longer time frames, and identify the potential BIGGER MOVES. Instead of dedicating your whole life at the monitor, second-guessing each tick, analyze the bigger moves of the market, add-in what’s happening to other markets, other assets, currencies, bonds, commodities, and you’ll see the bigger picture–which’ll be a strong boost to your analysis if you know what you’re doing.

5 MIN CHART
No matter how strong the signal you see in the 1 minute, 5 minute, 15 minute, 1 hr, 4 hr chart, all of those minor frames, can be nullified if the bigger move is against you. Again, it all depends on your strategy. In the example above, in the 5 min gold chart, if  you merely base it on that time frame, then yes you would’ve shorted on breakdown, but…… if you were looking at the weekly chart of GOLD you’d see that it has formed a strong hammer upon re-test of the 1180 level, and it is coincidentally lying at a very critical UPTREND LINE. (sorry I currently do not have access to my bloomberg chart)

By looking at the longer time frames, you’ll have a better understanding of the market’s state, psychology of the players, important supply/demand levels, major directions, trends, breakouts, channels. If you look at the 10 year chart, you’ll understand the market’s state for the last 10 years. A break out in the 10 year chart is freaking more powerful than 10000000000000 billion SELL signals in the 5-minute time frame! REMEMBER THAT!

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Of course, DAY trading/short term trading can be VERY REWARDING given the right circumstances, but on my experience, one single correct trade, on a full-blown big move, can equate to 100 day-trades/short term trades. Too many trades will lead to more emotional moments, and more errors. Even if you have a very powerful 15 minute chart, with all the imaginable patterns, and indicators, your trade can easily go against you because of any random factor (news? big investor going against your trade? policy shift? weather? terrorist? volatility? list goes on)

I’ve tried trading a lot on the short term, actually I do it from time to time, whenever I see an opportunity. But I’m not proud of it, nor am I fond of it. I say this, because I believe that trading does not have to be done forcefully. I firmly believe in the addage; “the big money is made by being right and SITTING TIGHT at the same time”. Opportunities will come and go, you just have to be patient, be a sniper, have a professional poker player’s mind set. Ride the waves, not the ripples. Why the fuck would I try to trade everyday, if just a few solid trades a year would suffice a thousand insignificant trades that result in small profits/losses.

 

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In my experience, there are too many random factors that is manifested through day-to-day volatility, it can easily make you RIGHT/WRONG in the short term, this leads to a lot of whipsaws and make you feel like a freakin genius. Yes it can reap you easy money, but IT CAN ALSO MAKE YOU GO BUST if you do not know what you’re doing and get swayed by each little sissy move in the market.

biel
I’m also saying this because I believe in the VALUE OF TIME. If I can trade effectively without watching the ticker, and wasting time looking at signals in the short term, then I’ll have the time to focus other stuff, like businesses, establishing networks, and most importantly mingling with hot chicks. That’s all. Ciao.

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