Knowing the time frame, you will be operating is fundamental to your success when trading stocks. It’s probably one of the most critical factors in financial trading. And because it’s so vital, many professional traders use multiple time frames simultaneously when analyzing a particular stock or index. A Hong Kong stock broker will be able to help you with this.
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What are time frames?
A time frame is simply a period in which a price action occurs. If a trader uses a five-minute chart, that means they’re going to be looking at the price movement over five minutes. That’s not to say that their trades will be five minutes apart; it just means that they’re using the price movement over five minutes as an input to their trading strategy.Â
Similarly, if you look at one-day charts for stocks (which are very common), it doesn’t mean that every trade or decision you make has to last 24 hours or benefit from an activity that takes place over one day only. Instead, it means you’re basing your trading decisions on what happens with each stock on any given day. You might make one trade on Monday, another on Wednesday, and yet another the following Friday night; it won’t matter because your time frame is “one day”.
Asian trading time frames
There are many different time frames for traders in various financial markets, including stocks, indices, currencies and commodities. The Asian market runs from 9:30 p.m EST until 4:00 a.m., which means there are technically two sessions co-occurring 24/7. Because each session occurs at different times within each country’s respective time zone(s), prices can often move inconsistently between these sessions due to time zone clashing. Some traders, therefore, prefer to use Asian session charts when trading during the European and North American sessions. They do this to reduce the number of variables they need to consider for a trade to go smoothly (e.g., news events from different countries).
How can you make successful trades using time frames?
Daily and hourly charts
The Daily chart is one of the most popular time frames because it’s simple to understand and well display the big picture. If you’re considering a trade for a stock or index, look at its Daily chart first. This way, you can determine some essential things such as:
If the Daily chart looks good with high volume coming in on recent highs that have been tested several times without being broken, then consider going into a trade with confidence, provided you’ve done your due diligence. A four-hour chart might be suitable to use as a secondary method for timing entries and exits if no significant economic reports are being released within the next few hours. It will also explain whether the price is likely to move upwards or downwards during the session.
Traders will often use both Daily and four-hour charts at once to establish whether they should enter a trade before looking at one-hour charts because these time frames give them an idea of what to expect regarding the price during the session. If there’s no potential for profit within the next few hours, it might be best to wait until later that day or even overnight.
Using one-hour charts
This method can be helpful for precision for particular entries and exits. For example, if you’re expecting an economic report on oil prices in the next hour or so, you’ll want to ensure that the price is on an uptrend on the one-hour chart before entering a trade. Once the economic report has been released, you might switch to price action on a daily or four-hour chart, depending on how your trade performs.
Using multiple time frames for entries and exits
It’s one of the most profitable ways to trade because there are more opportunities to take advantage of regardless of how the price moves. If you’re waiting for an Asian session spike that’s not too late in the day, then this could be in reach if you’ve used daily and hourly charts as well as 15-minute ones. Each time frame will provide you with different information about where the price will likely go soon. Once you make a trade, watch the one-hour chart closely from your laptop during the European and American sessions because it will alert you when there’s an opportunity for profit.
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