What time frame to use for looking at charts?

pj12

Is there anywhere to go to read or learn about this for stock charts. I'm interested in what time frame should I be looking at as the information will change when going between daily, monthly, 5-day, or weekly. Thank you.

markd

Time frames are all based on the same data, but each time frame summarizes the data differently.

Actual trading generates a continuous stream of changing prices (and the volume of each trade), day in and day out. Different charts display the data differently.

A tick chart shows every single trade, leaving nothing out. Very short term day traders might use these charts, but for most traders, it's too much information.

A bar chart, instead of presenting all the data, summarizes it by selecting representative data from a selected unit of time. Each bar shows only four prices - the open, high, low and close. The smallest unit for a bar chart is typically a minute, the largest is typically a month or a quarter (three months).

A day trader would like a 1 minute or 5 minute chart while those would be way too much information for a buy-and-hold portfolio manager. Conversely, for the day trader, a daily or weekly chart over-summarizes the data because it doesn't show him where the intraday highs and lows were during the day, and that's what he wants to trade on.

So, you choose your time frame(s) based on how much information you need for your trading style. If you are a swing trader (holding a few days to a few weeks), you want to look at the daily and probably the weekly charts to determine the trend, and where support and resistance is, and then look at maybe the hourly charts to pick your entry. If you buy and hold (a few months to a year or more) you would look at the weekly and monthly charts to analyze the longer trends, and the daily to time your entries.

It's also possible to trade from point and figure (P&F) charts that summarize price data by a completely different method, but I will leave it to @lmkwin to explain that better than I could hope to.

I am guessing you are new to the markets. If so, I think you might want to start your journey here:

https://school.stockcharts.com/doku.php?id=market_analysis

The articles are excellent and will save you a ton of money because you will not need to buy very expensive and often not very good books that cover the same topics but not nearly so succinctly. You should read all the articles if you can, but if you can only read two, my recommendations would be Dow Theory and Wyckoff for the high level explanations of how the markets work.