But Daily Charts aren’t the only charts that I use. I also use Weekly Charts to get a longer range perspective on price and volume. Other investors use monthly charts, hourly charts and even minute charts, but I don’t use or have a need for those charts very often. Fortunately everything I know about Daily Charts applies equally to every other chart no matter which time frame it’s based on. I can use the same price and volume metrics and the same momentum indicators and oscillators. They’re applicable on any chart based on any time frame. It’s one of the nice things about technical analysis.
For trading purposes I feel most comfortable trading with the Daily Charts. Monthly charts seem too glacial to me and I’ve never been interested in intraday charts because the volatility just seemed like random noise. Intraday charts always seem too erratic for me to get any solid confirmation signals. Intraday charts also 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 different time frame charts of the same stock I rely on the longer time frame to identify the major trend as well as the major support and resistance levels. I use the shorter time frame chart as the basis for making the actual trade. Ideally I’d like my trade to be in sync with the two 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 then that’s a red flag for me and I have to ask myself if I really want to make that trade. I also check momentum indicators and oscillators to look for 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 trend but the knowledge can keep me from getting shaken out of a stock too early. This allows me to hold on to my successful trades longer for larger gains and reduces the number of trades I need to make and the number of commissions I need 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 kind of information that puts the Daily Chart in perspective when zeroing in on the correct direction for a high probability trade.