1min chart trader is vulnerable to contra setups on 5min,15,60,240,Daily,Weekly etc.
Hello C6,
Similarly, those trading longer timeframes will often have shorter timeframe players taking the other side. Even in the strongest of secular trends, it is very unusual - to say the least - for a market to move solely and continuously in one direction in all time frames. The further you zoom out, the more potential traders there will be to push back against your position. Long a weekly breakout and think of all the daily / hourly players who are selling to you. Short a one minute breakdown and the tick scalpers will be buying from you.
It all comes down to perceived value and this will obviously vary enormously between participants. A 10 second ripple or a monthly tide actually look much the same (fractal) if you remove the chart periodicity. This is probably becuase human psychology is consistent regardless of time frame. So I would say there is no intrinsic advantage to playing longer timeframes, especially if you subscribe to the view that a longer term trade demands a wider stop loss.
(For the rare few that can pinpoint an entry on a fast chart, employ a "scalper" size stop and then ride it for a huge payoff on a slower chart there probably is an advantage. But that lies more in their skill than any benefits offered or not by a certain periodicity).
You might claim that the opportunity cost of one's time is a reason not to trade short time frames, but you should be paid more by a shorter time frame as you make yourself available to ride a larger number of smaller waves - increasing size apppropriately - than your less active adversary. The only disadvantage here is commission costs, but if they are low they are easily absorbed.
Noise? No such thing imho. Every trade counts and matters to someone. In fact the devil is often in the detail that many write off as meaningless.
It is true that fundamentals may drive longer time frames ... in this way I suppose they are more truthful, more reflective of the true value of an instrument, but truth could be said to be insignificant. What matters is finding something cheap / expensive by your criteria and then buying / selling it for a profit. Does it matter if the price progression "smoothed" by time is more honestly reflective of the instrument's true value? I would say not. What is last traded price, after all, other than a momentary consensus of value between those participating (or choosing not to - because they see no under- or overvaluation) at that time? The perceived value of the fundamental buy and holder will differ from that of the scalper but each has a fair and equal opportunity to profit from their view, regardless of what the instrument is actually "worth". Compared to similar properties that have been bought or sold in the last few weeks, my flat may be said to be worth 100k but if someone's only prepared to pay 90k and I want to sell it immediately, then the intrinsic value is somewhat irrelevant.
But ....does a particular time frame (or zone, at least) hold temporary dominance and offer the best R:R at any given time? I would say yes it does. For instance the 15 min is strongly trending with clean waves so you trade that until it starts to congest; in the congestion you go for 2 or 5 minute and trade the range; but suddenly there is an FOMC decision so you switch down to 10 seconds for a few minutes until things settle. In each case you can vary your size to keep the capital at risk reasonably constant. Flexibility is helpful as it allows you to adapt to the size of the current waves and conditions ... until they change, which they invariably do to keep us on our toes.
All imho.
Interesting topic Tubbs, cheers for bringing it up ... and is your trading floor for locals only?
