Timeframes for swing trading

Beginner Questions
1

Dear all, my nick name says it all, I’m absolutely new to trading.

I have a question I would like someone to reply.

When defining time frames to work with for swing trading in FOREX, babypips.com defines mainly 4 hour and daily screens but instead, other authors (like Dr. Alexander Elder, “Trading for a living”) define daily and weekly screens, although for stock trading.

While the swing trading principles definition are quite the same, I wonder why these different approaches. Would it be the trading vehicle, stocks vs currencies?

Some help?

Thanks.

2

I’m guessing you’re wondering why some place says trade 4 hour time frames for swing trading, some say trade daily and/or weekly time frames.

Well it doesn’t really matter what time frame you trade in, you can make a profit using any time frame. It all depends on one thing, it’s your personality.

Trading using a 4 hour time frame you make be able to find trades that will last for an hour to a couple of hours before you hit your profit target.

Or if you prefer to be in a trade for days, weeks, or sometimes even months. Then you would trade using the longer term time frames. Like the daily, weekly, and monthly.

It all depends on what what you prefer to trade, if you’re the type that can check the market maybe once or more every hour and trade the smaller moves you can do that.

If you can only check once a day, perhaps you want to trade a longer time frame like the dailies and weekly. Heck investors who buy and hold for years trade based on the monthly time frame. They may check a trade once every couple of months.

Basically it doesn’t matter what time frame you trade in, it depends on what type of trading personality you have.

If you can afford to sit in front of your computer for a while and prefer constant action, you can even trade the 10 min time frames.

3

Thanks a lot mataspeed, you were right with your guessing.

I just wonder how swing trading may be done at different time frames.

As I’m expecting to run trades lasting from a few hours or maybe a day to a few days even a week, I didn’t understand how this could be done from different timescales.

I thought trades duration were very depending on timeframes they were launched from.

Anyhow, I’m sure I will see things much clearer once I start demo trading.

Thanks again.

4

In trading equities, there is usually an interesting progression of events which also translates (somewhat) into trading forex.

when a stock is going up, having been kicked in the butt by “something”, you find that the first day is pretty much nothing but straight up with only the most minor of retraces — on DAY 2, the stock continues up, retracing around 10:30 EST and then moving back up to the closing price after 2:30 PM EST.

on DAY 3, the stock will GAP for the open and reverse no later than 10:30 - 11 AM, EST and either close lower that day, or wait for the next day to sell off BIG, for the next 2 days, which if im correct in my counting, equals ONE WEEK of which one is using the daily chart to trade.

FOREX is now doing something very similar, but the books you read were written back when the stock market BEHAVED as written — these days the stock market simply goes up a bit and then gets shorted back to earth.

there are no true lovers out there, only men with fast hands and a “quick” look at life — sooner or later we will return to foreplay and pillow talk, but right now its WHAM, BAM ---- thank you . . . . . . . .

for the women traders out there, please excuse what appears sexist, but definitely not intended, as the male of the species is well known for his glandular responses to testosterone driven situations.

For me, women are the most wonderous of creatures, and in no way would i care to insult a single beautiful soul !

Hopefully soon we can get back to loving, and not “quickies !”

enjoy and trade well

mp

[B][I]Within the great hall at Elfinore stands a wondrous coffer, precisely four cubits square and securely latched against the outside world. Inside that repository, shut away from impertinent eyes, abides many an intriquing trading secret garnered from around the world and over the ages !

As a child, i used to watch from the darkness as the secrets were debated and annotated by the elders. No one there held a single thought of my presence – BUT I KNOW WHERE THEY HID THE KEY !! [/I][/B]

5

Hi Mataspeed, another beginner looking for help. I can’t figure out how to correlate the various time frame charts: for instance, the 5M chart shows bearish sentiment and the 15M shows bullish. I’m using ichimoku and trying to learn how to scalp, being as how I am home all day (retired). I’d appreciate any help.
Thanks, John

6

jweber01,

It is correct that you see this. Each timeframe can be seen as a world on its own with its own directions. But the one minute chart exists within the daily chart world.

How you can interpret it is like this:

  • A trend on a daily chart is not one action defining the whole. The trend itself consist out of ups and downs. These ups-and-downs are individual trends on lower timeframes that form fractions of the overall trend. This means that on a one minute time frame you can have an up trend lasting three days without a significant effect on the trend on the daily chart.

How you can use it is to determine if a tradesignal on a lower timeframe makes sense. If you get a buy signal on the one minute chart after a three day ralley, with the daily chart showing a downward trend, you may want to reconsider the signal on the one minute chart as the changes are that the uptrend will be broken to continue to overall trend.

Does this help you?

7

The breakdown of trader types (day trader, swing trader, position trader and investor) comes from the world of stocks.

Stocks can gap up or down quite a bit during the overnight session so many traders would see holding a position overnight as an unecessary risk. They would open and close all trades during the same day: Day traders.

At the other extreme, you have investors. Investors hold a postion for a year or more believing their investment, as well as the underlying base value of that investment, will rise in value over a long period of time and, in the U.S. anyway, they can take advantage of long term capital gains tax rates which are considerably lower than short term cap gains, which are treated as essentially ordinary income. Very few “investors” are found in forex because there is no underlying absolute value to currencies – they are only relative to the value of other currencies and, in reality, can only rise so far in value.

Position traders look for long term price movements, again from the world of stocks, rebalancing their portfolios with company quarterly earnings reports. Position traders, therefore, hold positions for 3 months or more.

Finally, the swing trader. He is the one that is left over. The name comes from trying to get in a trade at the bottom of a price “swing” and ride it to the top of a price “swing” before it reverses, whether it takes one day, two days, two weeks or two months.

Swing traders are interested in trading the “swings” that are most noticable on the daily chart. They can drill down and find more fine-tuned entries on smaller time frames such as the four hour or even the one hour but are looking for much larger movements than the typical day trader.

Except for finding a general trend to be on the right side of, no swing trader would ever trade off the weekly. That would be in the realm of position traders and investors. So, the “some” that say that don’t have a clue abou what they are saying.:smiley:

8

IdeFX,

Yes.I signed up for a Demo. account on Nadex today. I will see if I can apply what I’ve learned thus far to winning some "box spreads."
Thanks for your help!

9

Hi. Im also thinking of using nadex. How is it going for you?

10

I haven’t funded my account yet. Been paper trading for quite a while and was gaining confidence so I signed up for a demo account. Well, I lost every trade I entered. Although I was winning 2/3 of my paper trades, I found that I could not apply the strategy I was using to the Nadex platform. I am of the opinion that a more astute trader could do very well with the Nadex box spreads, especially since risk is predefined. I intend do some more studying and try to adapt to the system. Let me know if you how you do!
John