The secret to choosing the perfect chart time frame

Apurva Sheth
I've already explained to you the basic elements of chart construction. I hope now that when you see a chart you immediately see the different parts of it and are able to read its basic information.

Now, charts can be constructed based on different time-frames.

I myself use a few different time-frames when I create charts, and today I will show you some of these.

Let's start with lowest time frame charts.

  1. Intraday Chart
    This chart is used to plot price movements during a trading session. It would consist of all the data points between a market opening and closing.

    Intraday charts give you a detailed picture for the day's movement. These charts can be used to view a single day's movement from session opening to closing or many days intraday movement from opening to closing.

    For example, I may want to see the price movement on the index for an important day like the RBI Policy or may want to see the last fortnight's intraday charts leading up to the event. The most commonly used time frame on an intraday chart is 1 hour, also known as an hourly chart.

    Depending on your trading style and preference you can have charts as low as tick charts which is a chart that plots price every second.

    (Later in this letter I will share my secret and logic of choosing the perfect time frame for trading...)

    For the time being just have a look at the chart below. It's a 60 min chart of Nifty since 17th October 2014. The data between the dotted vertical lines represents one day's trading activity.

    60 min Nifty chart since 17 Oct 2014
    Source: Spider Software India

  2. Daily Chart
    A day represents a complete cycle of events in our lives right from sunrise to sunset. We wake up every morning, perform our duties during the day and retire from all the chores in the night and the cycle moves on. We live our lives in parts and a day is the best representation of such parts.

    An advantage of looking at daily charts is that it makes your trading less emotional as it adds only one new piece of information every day. So you can sit back and take a prudent decision without worrying for tracking price change every minute. I have personally observed and learned that focusing on daily charts helps you avoid two biggest mistakes a common trader does i.e. overtrading and overanalyzing.

    Most market observers including fundamental analysts, financial media etc. gauge prices on a day-to-day basis. Even the NAV of a mutual fund is calculated on a day-to-day basis. Psychologically, daily price movements is what affects the most to anyone in the financial markets.

    The charts that you saw in my previous articles were all daily charts. I also prefer daily price charts over all other time frames.

    Nifty daily candlestick chart since March 2014
    Source: Spider Software India

  3. Weekly Chart
    Weekly charts plot a whole week's price data. So a weekly candle opening price would be Monday's open, and close would be Friday's closing level. The highest and lowest that the stock or index may have travelled during the whole week will become the high and low for the weekly candle.

    The chart that I have attached below is a weekly chart and it shows data for the same period that the daily chart posted above shows. You must have noticed that the number of candles have reduced in the weekly chart and it is also less sensitive to price movements compared to the daily chart. That's because it combines 5 days data points into 1 week. This helps focus more on the trend rather than its sensitivity.

    Nifty weekly candlestick chart since March 2014
    Source: Spider Software India

  4. Monthly Chart
    Monthly charts are prepared using the same principles that are used for preparation of weekly charts. The opening price of the first trading day of a month's open is considered as the opening level for month.

    And the last trading day's close is considered as closing level for the month. These charts are mostly used by investors with a longer horizon. There are charts even higher than monthly time frame ones like quarterly, half-yearly and yearly but unless your investment horizon matches Warren Buffett's you don't need to look at these.

    Nifty monthly candlestick chart since March 2009
    Source: Spider Software India

Ideal Chart Timeframes based on market participation
Market Participant Time in Position Expected Returns in % per trade Chart used for
Trend Determination Entry & Exit Points
Long term investor Months to years 30% and higher Monthly Weekly
Intermediate term trader Weeks to months 12%-30% Weekly Daily
Swing trader 3-20 days 6% - 20% Daily Hourly
Day trader Hours 0.5% - 2% Hourly 10 minute
Micro trader Seconds to minutes A few pips 5 minute 1 minute

As promised, let me tell you how I go about choosing a timeframe for my analysis. The table above will help you determine an ideal time frame to choose for your analysis depending on the category of participant you fall into.

I am sure several of you will fall in the category of either a swing trader or intermediate trader. I have spent most of my career in recommending ideas to these two group of market participants, and if you are into this kind of trading, then this is the perfect platform for you!

Okay, so let's assume you are a swing trader interested in trading ideas that generate returns of anywhere between 6-20% in a period of 3-20 days.

The chart that you should pick up for your analysis or trend determination is a daily chart. All your trading decisions should be based on this chart alone. The chart you pick up for trend determination will become your 'Chart of Choice' (CoC). Now once you are convinced that the stock you have chosen is worth your hard-earned money...

'STOP'

Don't be in a hurry to place an order with your broker. Just hold on to your excitement and put your phone back where you picked it up from.

Now once you are settled just jot down your points/arguments for entering the stock.

Once you are done with it, just check one degree higher time frame chart above your 'CoC' to CONFIRM whether this chart also reinforces the same view you had about the stock when you analyzed it on your 'CoC'.

In this case we will check the weekly chart of the stock and confirm our views on a higher time frame.

If it doesn't confirm, then it's not the best of things to go ahead with this stock.

On the other hand, If you are convinced that the stock is worth your money, just hold on to your breath and check a lower degree time frame chart for best entry opportunity.

A lower degree chart in this case would be an intraday chart.

My favorite timeframe on an intraday chart is 75 minutes.

The 75 minute timeframe chart divides our market hours which start from 9.15 am to 3.30 pm (375 minutes) into exactly 5 equal-sized candles. This helps me get a better picture for the day and score over the hourly candles, which breaks unequally at the end.

In case I want to move further down on the timeframe, I choose a 25 min candle which divides 75 min into 3 equal parts or a 15 min candle which divides 75 min into 5 equal parts.

Check for a best entry opportunity on intraday charts and then finally place an order with your broker, who will be eager to buy at the market rate but you would stay firm with your price levels and not get influenced with his sweet talk.

Now I am sure you must be thinking that what do I look for on a weekly, daily or intraday chart and how do I decide whether to buy or sell a stock. Don't worry! As we move ahead in this journey I will show you techniques that help you figure out exactly how you are to decide that. But until then I have given you a process to follow while doing your analysis.

And I promise that we will revisit this trading strategy again once we are through with a few more technical analysis concepts... so stay tuned.

Which time frame charts do you prefer? How and why did you choose this time frame? Share your views in the Club or share your comments here.

Get Asad Dossani's Best Short Term Investment
Opportunities Delivered Straight To Your Inbox!


Sign Up For Profit Hunter Today... It's Free!
 
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use
 
 
We request your view! Post a comment on "The secret to choosing the perfect chart time frame". Click here!
21 Responses to "The secret to choosing the perfect chart time frame"
Emmanuel Enyiegbulam
31 Jan, 2018
The secret to choosing the perfect chart time is highly important to me. Please i need it and more. ThanksLike (4)
Prem
06 Dec, 2017
Sir how and where we can get these charts for accessingLike (2)
Pradip Chatterjee
08 Aug, 2017
How to trade nifty intraday Like (4)
sukumar
29 Jul, 2017
sir, i need markets entry exit times,and time frame of charts. thanking you,Like (5)
Vivek Joshi
25 May, 2017
Sir But if I am a day trader and want to enter a trade after 5 min of market opening. Which time frame I will choose as the day has just starter and I would not have 75min or 25 min time frameLike (2)
manus
21 Dec, 2016
Apurva Seth, do you read the comments here? Even after reading if you are not responding means you are thinking that all are waste here. For day trading you are saying to see trend use hourly chart and for entry exit 10 min chart. 10 min chart decides trend or hourly chart. 6 candles of 10 min chart are bullish. At the open 7th bullish candle on 10 min chart, first bullish candle will erupt on hourly chart. If 7,8,9,10,11,12 are bullish on 10 min chart then corresponding hourly chart candle will close bullish. Otherwise doji. 1min candle decides whole trend. 5 candles on 1 min chart are bullish? 1 candle of 5 min chart is bullish. 2 continues bullish candles on 5 min chart? 1 bullish candle on 10 min chart. 3 bullish candles on 10 min chart? 1 buliish candle on 30min chart. 60 bullish candles on 10 min chart = 10 bullish candles on hourly chart. Say bullish candles started when RSI was 20, then where the RSI will go on 10 min chart after 60 continues bullish candles? About trading anyone is getting up writing anything which is coming to his mind. Fortunately it is free here. I do not know if people are taking huge money as fees to teach which do not know like this. Niether hourly candle can tell the trend not 10 min. Only God can tell what will happen next moment. Like (1)
manus
07 Dec, 2016
1- Please tell which candles to follow? Hekin Ashi or Japanese. 2- Time frame for trend and entry-exit is ok. Which indicator to follow for entry-exit please?Like (1)
ganesh
19 Nov, 2016
i want to best time frame for intraday,Like (3)
gupta
02 Oct, 2016
Dear sir, Thank you very much for sharing such a valuable information and i use 30 minutes time frame regularlyLike (1)
Manish
27 Aug, 2016
Very nice explqinationLike (1)
Lalitlk
21 Apr, 2016
Glad to know your preference for time frame of 75 minutes. Had been trying to share my chart based on TF 75 minutes regularly in FB group " Daily_Nifty".Like 
Nilesh
01 Apr, 2016
Dear sir, Thank you very much for sharing such a valuable information and also for increasing our confidence and knowledge please share with us which is the best parameters we should apply in hourly as well as daily chartsLike (1)
ibshan chawdhry
25 Feb, 2016
sir i m day trading no over nite postion and no tens market close i m freeLike (2)
chandan nahata
01 Aug, 2015
Sir, for a investor it is like a dream.when he doing the transaction (buy/sell) confidantely,based on technically.fundamentals we can draw ourselves.i shall be happiest person,since i was looking for this since a long time.thanks.Like 
A K Goel
11 Jul, 2015
Dear Seth, Lot of thanks sharing valuable knowledge, please pass on maximum information on line those who can not afford . Best of Luck Goel AKLike 
LAKSHMIPATHY
19 Dec, 2014
which time frame is suitable for equity intraday tradingLike (8)
Anil Singh
16 Dec, 2014
Hi! Mr Kochar, BSE & NSE both give these charts. You can access these charts on their website. And, I think, these are log-based charts with multiple indicators. Like (1)
Ravi
14 Dec, 2014
pl guide us as where to get such software on which we can plot all charts alternately and use to trade with your suggested time frame in the market hours thanks Eqty mtr and Apurva sethLike (4)
ravi
11 Dec, 2014
I use daily charts as I can't trade intraday bcz one has to constatly monitor and find enrty and exit points.Any way your guidance is very helpful to improve my skill. Thnks a lot dear Apurva.I m looking forward to your articles.Like 
Raviraj
11 Dec, 2014
Hi Apurva, Thanks for sharing the ideal chart timeframes matrix. I use multi time-frame charts for my analysis and my favorite timeframe is Daily and I use 4H or Hourly chart to time the entry or to find the best pattern and entry and once in a trade I use the Daily chart to continue with the trend.Like 
D D Kochar
11 Dec, 2014
Sir, I have precisely 3 questions to ask:- 1. From where does procure the mentioned charts because i am sure the no AAM investor can prepare such charts. 2. Can an AAM investor spend time required to study such charts in his/her packed daily routine? 3. If an AAM investor has to slog the time on such charts, why should't he/she become an analyst and become competetor to companies like Equity Master/Money works for me/Alpha Invesco & many such more. Any investor wants a cut & dried recommendation to invest with minimal effort Like 
We request your view! Post a comment on "The secret to choosing the perfect chart time frame". Click here!