Most new traders start off trying to day trade by looking only at the 5 minute or even the 1 minute charts and expect that they will make nice easy money every day.
The reality of this scenario is that many losses occur and this leads to frustration and despair.
One classic example of what happens to these traders is the following:
They place a trade and as soon as they enter the market price goes the other way and stops them out!
If this sounds familiar it could be that you need to pay more attention to different timeframes.
There is one really important rule to bear in mind when looking at your timeframes and that is, the higher timeframes rule.
This means that the 5 minute chart is subordinate to the 15 minute chart and the 4 hour chart is subordinate to the daily chart.
Using multiple timeframes is especially helpful when trying to work out the most probable market direction for any given day or trading session.
There is no single timeframe that we would call “the best” because we recommend that you take several of them into account before taking a trade, and that goes for you whether you are a day trader a swing trader or even a scalper.
And it’s vital that you pay attention to what’s happening on the higher timeframes regardless of what type of trader you are and what timeframe you enter and exit the market on, you will find trading much easier and much more enjoyable if you can learn to use several timeframes rather than just one.
The other thing to bear in mind is that different personalities suit different people, so if you’re looking to trade from the 5 minute chart taking quick profits here and there but you get stressed and can’t stand to look at the screen longer than 10 minutes a day you’re probably trading the wrong timeframe. You may need to trade a higher timeframe where you have much more time to plan and check each trade before you enter the market.
The trick is to find a set of timeframes that best suits your personality and style and then build your trading plan using these timeframes.
Next: Other Common Indicators