Key Question on Reading Trends

[mepbih]

I shall refrain from making any statements to skew the thinking but offer a few ideas to get the thoughts running in other possibly greater minds.

It is an generally accepted principle that the quality of a chart is influenced by its duration. A chart showing a market by monthly candlesticks will be a weightier consideration than a chart based on 5 minute or 1 minute data.

Here is the question in my mind about this. What weighting would we use to sensibly apply this in the relative value of such technical signals?

Suppose you had Monthly, Weekly, Daily and 4 Hour charts all selected at the same time, suppose 4:00PM. You get indications of what might be sensible trades looking at the charts.

If you took the value of the shortest duration chart as a value of 1, then how would you rate the longer charts?

Examples: (arithmetic) 4H - 1, D - 2, W - 3, M - 4 or possibly (binary) 4H - 1, D - 2, W - 4, M - 8 or even as a ratio of hours (hours/4) 4H - 1, D - 6, W - 42, M - 180.

I would be interested if someone has professional insight into this or certainly a technical background as with engineering or other discipline to guide their thoughts.

Thanks for taking the time to puzzle over this.

 

[TheBramble]

You seem preinclined to assign greater weight to the longer TFs?

When trends change - they do so on the tick first...

As for pro insight, they're too lazy to look at anything shorter than the Daily...

It's really all a question in terms of trend reversals/commencement, whether you want to have a single indication in the Daily and lose 500 pips to find out, or find out in a diminishing/increasing sets in the Hourly and lose perhaps 3 X 150 pips in a series of LL/LHs or HL/HHs. Horses…courses….

My comments will be largely useless to you as you seem to think a technical/engineering background is significant to your endeavours. Unfortunately, that is my background, and where I came from, before I realised it had no application to the financial markets whatsoever.

Rather than fit IT to what you know/prefer, perhaps you should try and fit into IT?

 

[Charlton]

I shall refrain from making any statements to skew the thinking but offer a few ideas to get the thoughts running in other possibly greater minds.

It is an generally accepted principle that the quality of a chart is influenced by its duration. A chart showing a market by monthly candlesticks will be a weightier consideration than a chart based on 5 minute or 1 minute data..

Number of bars or duration ?? Is a 10 year duration chart based on yearly bars better than a 10 year duration chart based on 1 minute bars ?

Here is the question in my mind about this. What weighting would we use to sensibly apply this in the relative value of such technical signals?

Suppose you had Monthly, Weekly, Daily and 4 Hour charts all selected at the same time, suppose 4:00PM. You get indications of what might be sensible trades looking at the charts.

If you took the value of the shortest duration chart as a value of 1, then how would you rate the longer charts?

Examples: (arithmetic) 4H - 1, D - 2, W - 3, M - 4 or possibly (binary) 4H - 1, D - 2, W - 4, M - 8 or even as a ratio of hours (hours/4) 4H - 1, D - 6, W - 42, M - 180.

I would be interested if someone has professional insight into this or certainly a technical background as with engineering or other discipline to guide their thoughts.

Thanks for taking the time to puzzle over this.

What timeframe(s) are you using to establish trend or non-trend ?

What timeframe(s) are you using for your primary entry/exit signals ?

Are long-term trends more important, less important or equally important in establishing your entries and exits ?

Imagine two different charts where a trend based on monthly bars over the last 10 years was up in one case and down in the other, but where the hourly bars over the last month were identical in both charts and is an uptrend. Which do you give more credence (weighting) to ? The monthly downtrend ? The fact that the hourly chart for the last month is potentially an ending of that downtrend ? The monthly uptrend on the second chart ? The fact that the hourly chart for the last month appears to be a continuation of that uptrend ?

Do you look for confirmation between timeframes ?

It all needs to be put into context and not as simple as saying a monthly chart has more weight that an hourly chart

Charlton

 

[everyonerich]

tick chart
1min chart
5min chart
15min chart
30min chart
1hour chart
4hour chart
daily chart
weekly chart
monthly chart

all come from the same source, same chaos. its only your opinions thinks which one is better. stop comparing and just takes which one has entry opportunity

 

[fxmonk]

markets are fractal

Markets are fractal so I wouldn't say one time frame has higher quality than another (except for down to 1 sec/tick charts where things aren't happening on a continuous basis). As someone who uses fundamentals/behaviors in their trading, I would say, however, that longer time frames (daily) contain more relevant information vs. indeterminable factors that contribute to the chaos on smaller time frames.

Good luck,

Kris Matthews

 

[MrSpreadBetting]

So much silly and bad advice here.

I take it you want to day trade is that right ?

If so you want to use 4 charts for this, take it from someonw who has been trading for over 10 years, and has worked for a few financial firms.

Try using your 4 hr charts for direction, are you in a up/down trend or range, what is the 4hr chart doing ? is it making HH/HL or LH/LL, or HH/LL - LH/HL this is the direction chart.
You then want to use your 1hr chart to see how the 4hr candles/bars have been developing, try placing daily pivots on your 1 hr chart and weekly pivs on your 4hr chart.

Are any of your weekly R levels combined with your daily R levels or S levels ?
Try fibbing your 1 hr pullbacks on the 1 or 15 min charts, look for bias changes in the market using the 15 min charts for safer entrys but the tick charts will give you more aggress entry but also reward you with tigher stops.

Run down............

4 hour charts for direction

1 hr charts will show you how the 4 hr chart movment was created plus give you options for bias chages or fib levels

15 min charts for safer entry via bias changes(reversals/pullbacks)

tick charts for aggress entrys (norm have tigher stops after a bias change)

 

[tenbobtrader]

The Stock Exchange Explained

"Once upon a time in a village, a man appeared and announced to the
villagers that he would buy monkeys for $10 each.

The villagers seeing that there were many monkeys around, went out to the
forest and started catching them. The man bought thousands at $10 and
as supply started to diminish, the villagers stopped their effort.

He further announced that he would now buy at $20. This renewed the efforts
of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to
their farms.

The offer increased to $25 each and the supply of monkeys became so little
that it was an effort to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50!
However, since he had to go to the city on some business, his assistant
would now buy on behalf of him.

In the absence of the man, the assistant told the villagers.
"Look at all these monkeys in the big cage that the man has collected.
I will sell them to you at $35 and when the man returns from the city,
you can sell them to him for $50 each."

The villagers rounded up with all their savings and bought all the monkeys.
Then they never saw the man or his assistant, only monkeys everywhere!

Now you have a better understanding of how the stock market works."



by another on T2w some time ago

later

Andy

 

[Black Swan]

So much silly and bad advice here.

I take it you want to day trade is that right ?

If so you want to use 4 charts for this, take it from someonw who has been trading for over 10 years, and has worked for a few financial firms.

Try using your 4 hr charts for direction, are you in a up/down trend or range, what is the 4hr chart doing ? is it making HH/HL or LH/LL, or HH/LL - LH/HL this is the direction chart.
You then want to use your 1hr chart to see how the 4hr candles/bars have been developing, try placing daily pivots on your 1 hr chart and weekly pivs on your 4hr chart.

Are any of your weekly R levels combined with your daily R levels or S levels ?
Try fibbing your 1 hr pullbacks on the 1 or 15 min charts, look for bias changes in the market using the 15 min charts for safer entrys but the tick charts will give you more aggress entry but also reward you with tigher stops.

Run down............

4 hour charts for direction

1 hr charts will show you how the 4 hr chart movment was created plus give you options for bias chages or fib levels

15 min charts for safer entry via bias changes(reversals/pullbacks)

tick charts for aggress entrys (norm have tigher stops after a bias change)

Allright Dave hope you're well, can't disagree with any of what you've posted, but the OP was suggesting that longer TF's give a 'truer' indication of the state of the market at the given time you're analyzing it. IMHO there are no 'better' TF's and he's barking up the wrong tree with an equally barking assumption...

 

[MrSpreadBetting]

Allright Dave hope you're well, can't disagree with any of what you've posted, but the OP was suggesting that longer TF's give a 'truer' indication of the state of the market at the given time you're analyzing it. IMHO there are no 'better' TF's and he's barking up the wrong tree with an equally barking assumption...

Hi Blackswan feel free to pop back at my forum anytime!

I had to change your password and a few others as it was reports of accounts being hacked from my host, I think I had around 50+ account passwords to change becasue of this, but if you want you can PM me here and I will give you a password.

Davie

 

[Black Swan]

Hi Blackswan feel free to pop back at my forum anytime!

I had to change your password and a few others as it was reports of accounts being hacked from my host, I think I had around 50+ account passwords to change becasue of this, but if you want you can PM me here and I will give you a password.

Davie

No sweat Dave, thanks for the offer, but no thanks, I'll keep in touch with your good self though. Mail you with an idea (or two) later in the month