On our first DueDEX Connect Event, we are joined by trader and crypto expert Three Steps for a chat on the management of time frames and the techniques associated with it. Plus, we are looking at what misconceptions and mistakes traders often fall prey to.
If you want to find out more about crypto, do not forget to join our next episode on Telegram. You do not have time? Worry not. You can now access our series of weekly interviews on our official DueDEX page!
DueDEX: Hi there! Thank you so much for joining us for our first #DueDEXConnect event. We’re delighted to have you with us!
Could you please share some insights on time frames and how to use them for trading?
Three Steps: Hey DueDEX team and everyone else who is joining! Thank you for hosting and allowing me to give a brief overview of time frames!
When I first started trading, I was overwhelmed by all the information people threw at me in chats and on the phone. Basically, what often goes wrong is that you end up following other people's calls even though the time frame you use to trade can be completely different from theirs.
Some people trade on a 1-minute time frame and close their trades every 30 minutes, while others trade weekly or daily. You can see how easily the frequency of certain traders’ calls can mess up those trading on different time frames.
It is very important to always have an expected time frame in your trades and define the scope of your trading range to maximize potential earnings. I know this is very commonly accepted, but many new traders often fall into the trap of following other people without knowing how long they should hold a trade.
Monthly and weekly time frames are excellent for making buys that you will hold with relative certainty. If indicators cross bullish or bearish you can confidently say you have to keep selling the downtrend or buying an uptrend on a daily chart.
When it comes to bigger time frames, the best traders would only open high-risk trades if all the time frames look good. These are all little details that add up along the way, especially if you are using a lot of leverage and take frequent losses. A few good trades can increase your trading account greatly.
The famous market analyst William Delbert Gann used prices and time to create price-time angles and his research is interesting to look into. He could predict precisely when markets would go up or down. Many are still trying to figure out how he did it!
Another factor is time management. This does not have much to do with time frames themselves but rather with your own psychology and availability. Day traders sometimes sit behind their screens the whole day, but many people cannot do so. You have to properly manage the moments when you can look at charts, take profit or close at a loss. Alerts help very much, as you can study charts and put alerts on breaching trend lines or price levels and drastically lower the amount of time you spend staring at the screen.
Another interesting approach to saving time - this is not something commonly shared - is using range bar charts. Such charts are based on the volatility of financial markets. You might want to check them out here.
As you can see, a range bar chart shows you in detail how ranges trend. Range bar charts are great when volatility is high and markets move fast! (They are also available on Tradingview, by the way.)
Q: How did you choose what suits you most? Trial and error?
A: Yes. For me, it came down to just experimenting with trading in general. But I now understand that one has to really establish different intervals. I usually open the largest time-frame to chart the all-time trend, then I move to the next one until I get to the smallest intraday movement. This way, I know if the price is overbought or oversold in a large time frame - 1 month to 1 week - then at a daily and even smaller level. This provides a certain degree of certainty to either close your trade or double down along the way.
Q: You are a day trader, a swing trader, or an investor?
A: Good question, I think I can call myself all of those. In any case, it would be best to have different accounts to separate the various trades. I dedicate a certain percentage of my account to day trading and some to long-term holding.
Q: Would you like to share the ratio?
A: In general I think you want to decide based on the time frame you are trading on. Let’s say you are scalping and frequently do multiple trades per day, then maybe it would be wise to attribute 20-35% of your account to actively trade within that time frame.
The bigger the time frame the more certainty you have that it will eventually go in your favor. Bigger movements are always easier to predict. Somehow it is similar to how we can easily predict the movement of the moon or the earth. But smaller systems are very chaotic. In trading terms, you would say there is a lot of noise.
Q: Thanks for all the information you’ve shared with us today! Here at DueDEX, we’re wondering which time frames would you choose for swing trading, day trading, and scalping, respectively?
A: As stated before, I use basically all the time frames from monthly down to daily to zoom in on the trend and know where I am. You only have to do this once to draw trend lines and get familiar with them. But it is good to have a look at them before opening any trades to refresh your mind a bit.
Intraday the following time frames are commonly used: 12 hours, 6 hours, 4 hours, 1 hour, 30 minutes, and 5 minutes.
Scalping would really be 1 to 120 minutes, you need to find a good balance between studying the small time frame noise and still looking at it at least hourly.
Q: I am a scalper, I usually use either the 5-minutes or 1-minute time frame. What do you guys usually use?
A: 1-minute, too. If the trend is really taking off, often I switch from 1 minute to 3 minutes to 5 minutes as the trend 'cools down'. This seems to work really well!
If you are really crazy about scalping then tick charts would be best, but this is not really a place most people would go to since it is very hectic and noisy.
Also, I increase the resolution of the time frame if a range becomes too narrow. If a triangle is very broad, it is better to trade on bigger time frames - like 1 to 4 hours - and if it gets very narrow you can study it more closely. In the end, practice makes perfect and I would try a strategy out first with paper trading or small amounts until you get better.
Q: How to trade on a 1-minute time frame?
A: I treat all time frames the same way. With the 1-minute time frame, there is more noise, but the overall trading patterns and theory do not change whether you are looking at 1 month,1 week,1 day, or 5 minutes.
You should define ranges and patterns, and look for breakouts. It is best to buy on a retest and then aim for momentum to continue towards an outbreak as more buyers or sellers step in.
Some good tools to study time include sine waves as the market moves in cycles.
Q: Can you recommend some patterns that can be used with various time frames?
A: As a general rule, the bigger the time frame the more you can be sure that a pattern is valid.
Here are the patterns I commonly use:
-Head and shoulder patterns
-Three wave patterns
Thank you once again @Threesteps. We appreciate you giving DueDEX members an opportunity to learn more about timeframes and sharing your experiences. We also would like to thank everyone who cooperated.
Stay tuned for the next #DueDEXConnect.