I’m grinding through the school, playing around with mr. Fibbonaci, mr. Elliot and so on… and a question keeps poping up in my mind I do not find an answer for.
Its about which time period to use when applying those tools trying to find trends, support/resistance lines and so on…
I guess it all about how long trades you wanna make.
Lets try an example. For now, I do only daily trades, maybe max. 1 hour long ones. So I try to spot a momentary trend. What would be a appropriate setup for that?
I mean, it doesnt make sense to pop up a 3 month chart, draw a Fibbonaci and use those levels for a potential 30 min trend.
Are there any rules of thumb for what kind of time period your chart, your zoom level, your MACD, Stoch, RSI… settings should be?
This can be a really subtle area, and really depends on your overall strategy and trading style, but an oft-repeated rule of thumb for trend-following traders is to check the trend on the two TFs immediately above the one from which you are entering. In other words, if you want to enter off the Hourly chart, you would want to check trend on both the 240 and the Daily. But really there are many correct answers to this. Personally, I always check the Monthly, Weekly and Daily charts to give myself an overall sense of market direction, plot my S&R lines etc., then look for a more refined Entry on a lower TF (often, but not exclusively, the Hourly).
I use Fib to reinforce (or otherwise!) those levels on each TF, to assist with TP setting, predict retracements etc.
I personally don’t both with the indicators you mention - an occasional bit of RSI on the Daily but I find when I leave it off I make the same trading decisions - PA, S&R and an understanding of market direction is really all I use.
Simon Templar pretty much said it all. I like to remind people that the right time frame will find you. In other words, depending on your trading style and time availability, certain TFs make sense and others don’t. I can’t tolerate the 1M and 5M because my thought processes are deliberate and slow but others find they need the rush of immediately seeing things change and getting multiple trades per hour.