I remember when I first started trading.
I read books that said you should “pick your main time frame and then look at the time frame above it and the time frame below it”. So, for example, a swing trader would pick the daily time frame as his main time frame. Then, he or she would pick the weekly (above) and some intra day time frame (below).
A day trader might use the 5 minute time frame as the main time frame. Then look at the 15 minute (above) and 1 minute (below) time frames.
This is a nice theory but I have a problem with it.
I am a swing trader. Therefore my main time frame is the daily chart. This is where I spot trading opportunities. So good, so far. But conventional wisdom says that I should be looking at the weekly chart. But why? If I can see where the next resistance area is on the daily chart, then of what use is the weekly chart?
The weekly time frame is of very little use to me. The only time I would use the weekly chart is if I can’t see the next resistance point on the daily chart. Then I would move to the weekly chart to see where it is.
So, I don’t look at the weekly time frame very often. The two main time frames that I look at are the daily and the hourly chart. Take a look at the following chart…
This is a nice swing trap chart pattern that I was going to buy (I couldn’t buy it because my brokers website was down near the end of the day. So annoying!) There is no reason for me to look at the weekly chart because I can see where the next resistance level is.
Now look at the hourly chart:
There is a nice hammer at the end of the trading day that flushes out other traders. This is all I would need to pull the trigger. In order to get the best possible price, I might move down to a lower time frame such as the 15 minute chart. But it isn’t critical.
So, for me, the two most important time frames are the daily and the hourly charts. What about you? What time frames do you think are the most important?