Beginner traders and investors often get confused about the time period to set while performing technical analysis.
Depending on the trading style and strategy, you should choose from the following time periods:
- Intraday (represented in minutes and hour/s)
Another thing the beginner must know is that volumes are extremely important, and therefore must be tracked.
Here is how you should align each time period to your investment strategy:
MONTHLY CANDLE CHARTS
Monthly charts should be used by long-term investors. Such charts display price data that spans over several years, and should be used to spot multibaggers.
Monthly charts should NOT be used by traders, unless that trader wants to discover a long term buy.
Here are a couple of examples:
The story of Inventure growth is presented in two charts. This chart represents the period 2012-2016. The stock listed in 2012 and hit a high of 80+. Thereafter, something happened and a huge bearish engulfing candle formed (See (1) on the figure). The stock crashed and never recovered. Now, let’s check the next chart.
WEEKLY CANDLE CHARTS
Weekly charts are used by medium term investors (6 month holding).
Let’s check the weekly chart of Essel Propack. You may want to understand candlestick formations before attempting to understand this interpretation:
DAILY CANDLE CHARTS
Daily charts are typically used by short term investors and traders who’d like to hold stocks for periods ranging from 3 weeks to 5 months. These charts can also clue investors on to stocks with long term potential. Set the number of days to at least 120-150 while viewing these charts.
In this example, I tested Inventure Growth on a 1-day chart to check if it generated a bullish signal.
These charts are used by day- and BTST traders. There are different ways to use these charts:
INTRADAY 1-HOUR CANDLE CHARTS
The one hour charts typically give an indication of the day’s (or a major part of the day’s) trend. For example:
15-MINUTE CANDLE CHARTS
The 15 Minute charts typically give an indication of a trend that should last up to 120 minutes (15 X 8). For example:
IMO, any candle time period below 15 minutes may not be a reliable indicator. However, 5 and 10 minute candle time periods can be studied to form an opinion which should be validated by 15-, 30- and 60-minute candle charts.
Well, this is what you need to know about how to reconcile candlestick time periods with your investment style.