The fundamentals of companies can only take an investor so far in his research. They're great at helping the investor determine which stocks are the best stocks to invest in, but they're often quite limited in determining the appropriate time frame in which to buy the stocks. And, as in all things in life, timing is everything. That's where technical analysis excels. Technical analysis will provide the strategic and tactical perspectives to make the winning trades. And that's why I'm both a fundamentalist and a technician. I want to find and buy the best companies at the best price.
When I’m looking at a chart of a stock's daily price movements, I’m actually looking at the daily activities of every investor that's bought or sold that stock that day. Each candlestick on the daily charts represent a single day’s activity. This type of chart is generally referred to as a Daily Chart because it records the trading activity on a daily basis. That’s the time frame in which I feel most comfortable buying and selling securities. It’s also the most common time frame used by most investors and it's the easiest chart to find on the internet.
Two websites that are my favorites for finding daily charts are StockCharts.com and FINVIZ, but there are quite a few others. But daily charts aren’t the only charts that I use. I also use weekly charts. Weekly charts provide me with a much longer perspective on the company's stock price and volume.
Other investors may use monthly charts, hourly charts and some may even use minute charts, but I don’t usually have a need for those charts very often. I concentrate on using the daily and weekly charts. Luckily for all of us technical traders out there trading every day, everything we study and learn about charts on any given time frame applies equally to every other time frame we view. I can use the same price and volume metrics and the same momentum indicators and oscillators that I use on the daily charts on every other time frame I analyze. They’re all applicable on any chart based on any time frame. It’s one of the nicest things about studying and learning technical analysis.
For trading purposes I personally feel most comfortable trading with daily charts. Monthly charts seem too glacial to me and I’ve never been interested in intraday charts. The volatility just seems like random noise. Intraday charts always seem too erratic and I can't ever seem to get any solid confirmation signals to trade these charts. Intraday charts are generally used by day traders and I’ve never been interested in day trading. If anything, I’m a swing trader for high beta stocks and a buy-and-hold investor for my core holdings.
Whenever I use two charts of the same stock that are of different time frames, I rely on the longer time frame to identify the major trend with its major support and resistance levels. I then use the shorter time frame chart for the basis of making the actual trade. Ideally I’d like my trade to be in sync with both charts but I can only do this if the two time frames are in sync with each other. If both charts are showing an uptrend I want to be trading long. If both charts are trending down then I want to be trading short. By trading in sync with the two different charts my probability of completing a successful trade is greatly enhanced.
However, if the two charts are out of sync that’s a red flag for me. I have to ask myself if a trade like that makes sense. Usually it doesn't. I also like to check the various momentum indicators and oscillators on each chart to look for evidence of any additional confirmation.
The advantage of reviewing the longer horizon chart is knowing the bigger picture and seeing the overall longer trend. This not only gives me a clearer picture of the stock’s major movements, it gives me the knowledge that can keep me from getting shaken out of a stock prematurely. This kind of knowledge will allow me to hold on to my successful trades longer for larger gains. It also can reduce the number of trades required over time and the number of commissions I would have to pay.
The two charts below are the Daily Chart and the Weekly Chart for AT&T. As you look at these you can see that price and volume are similarly plotted and momentum indicators and oscillators are applicable to both. On the weekly chart it’s easy to see the major trend as well as the major support and resistance levels. This is the strategical perspective. On the daily chart it's easy to seeing the short term direction. This is the tactical perspective. These two perspectives together provide the information necessary to make that high probability trade.
Two websites that are my favorites for finding daily charts are StockCharts.com and FINVIZ, but there are quite a few others. But daily charts aren’t the only charts that I use. I also use weekly charts. Weekly charts provide me with a much longer perspective on the company's stock price and volume.
Other investors may use monthly charts, hourly charts and some may even use minute charts, but I don’t usually have a need for those charts very often. I concentrate on using the daily and weekly charts. Luckily for all of us technical traders out there trading every day, everything we study and learn about charts on any given time frame applies equally to every other time frame we view. I can use the same price and volume metrics and the same momentum indicators and oscillators that I use on the daily charts on every other time frame I analyze. They’re all applicable on any chart based on any time frame. It’s one of the nicest things about studying and learning technical analysis.
For trading purposes I personally feel most comfortable trading with daily charts. Monthly charts seem too glacial to me and I’ve never been interested in intraday charts. The volatility just seems like random noise. Intraday charts always seem too erratic and I can't ever seem to get any solid confirmation signals to trade these charts. Intraday charts are generally used by day traders and I’ve never been interested in day trading. If anything, I’m a swing trader for high beta stocks and a buy-and-hold investor for my core holdings.
Whenever I use two charts of the same stock that are of different time frames, I rely on the longer time frame to identify the major trend with its major support and resistance levels. I then use the shorter time frame chart for the basis of making the actual trade. Ideally I’d like my trade to be in sync with both charts but I can only do this if the two time frames are in sync with each other. If both charts are showing an uptrend I want to be trading long. If both charts are trending down then I want to be trading short. By trading in sync with the two different charts my probability of completing a successful trade is greatly enhanced.
However, if the two charts are out of sync that’s a red flag for me. I have to ask myself if a trade like that makes sense. Usually it doesn't. I also like to check the various momentum indicators and oscillators on each chart to look for evidence of any additional confirmation.
The advantage of reviewing the longer horizon chart is knowing the bigger picture and seeing the overall longer trend. This not only gives me a clearer picture of the stock’s major movements, it gives me the knowledge that can keep me from getting shaken out of a stock prematurely. This kind of knowledge will allow me to hold on to my successful trades longer for larger gains. It also can reduce the number of trades required over time and the number of commissions I would have to pay.
The two charts below are the Daily Chart and the Weekly Chart for AT&T. As you look at these you can see that price and volume are similarly plotted and momentum indicators and oscillators are applicable to both. On the weekly chart it’s easy to see the major trend as well as the major support and resistance levels. This is the strategical perspective. On the daily chart it's easy to seeing the short term direction. This is the tactical perspective. These two perspectives together provide the information necessary to make that high probability trade.
 Daily Chart |  Weekly Chart |
The above article includes many of the ideas originally published in the article "Trading in Two Time Frames" dated 9 September 2013. For that article and many other interesting articles, please click on the "MORE INFORMATION" button below.
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