Best chart interval for day trading
It is generally true that charts with smaller intervals will generate more signals with lower initial trading risks and lower signal accuracy while charts with larger intervals will offer the opposite.
Traders need to find the balance point that fit their trading profiles. For day trading Forex, a common mistake is using a very short time interval, such as 2-min or 5-min. The bar range of those charts are about the same as the market noise level. For swing trading over nights, you may use minute charts. If you would like to keep it simple, you can use 60 min charts all the time. Since the most big price movements in Forex happen at night of the U.
You can change the session time inside the "S" symbol icon window. Normally we just use the default Forex setting that is It will load the whole 24 hours of data. Normally, traders like to use a relatively larger interval chart as guidance, such as using a min chart along with a 3-min trading chart. We can call the 3-min chart the "trading window".
A trader will follow the signals and stop values in the trading window to execute trades. We call the min chart a "guidance window".
It will be ideal to find the tradable opportunities in the trading window that are also in agreement with the directional bias indicated by the guidance window. For example, trade the long buy signal agreement in the trading window while the guidance window also indicates a long buy signal. Under certain conditions please refer to Day Trading Rule A , we have to give more weigh to the signals in the trading window to "break the tie". Our software offers colors and dots as well as exact values.
Once the trader decides to trade, the entry, stops and exits are pretty much managed by the program. The best entry points are called "sweet spots" that the price is near by the T2 stops. When you see 3 bars that the close prices cannot breakout the T2 dots, it's a good time to enter the position.
You will know right or wrong very soon since the prices are near the T2 level. It is fairly straightforward, of course, you also see triangle, flatness and low volume at that time, it's the time to give it a try. You must know, no one can tell ahead the trade win or loss. It's always working on the odds.
Traders need to understand which phase the market is in. As we mentioned before, the market always alternates between a big thrust and consolidation. As a trend-following trader, you need to get very aggressive in honoring executing the signal agreement at the end of a long period of consolidation of the STM rules.
The odds for a big thrust or a "run" will be very high at this time. This is just the nature of the market. It is very important to know this. But knowing this phenomenon alone is not specific enough for trading. As a trader, we need to take a much closer look at how the market behaves in most cases.
Here are two filtering rules for day trading:. At the end of a major movement, 2 hours of consolidation is considered as "medium" and 3 hours of consolidation is considered as "well done".
This is just for day trading with smaller interval charts, e. Actually, the consolidation length is times the length of the major price movement. This is generally true for all interval charts.
Please note that this filtering rule could be used to "break the tie" if the trading window signals are conflicting with the signals in the guidance window. In other words, if you see two-hours or three-hours of consolidation in the trading window, the signals in the guidance window are less important. Also, this filtering rule could be used to supersede the filtering rule B stated below in case of conflicting. Day Trading Rule B - For day trading, don't fight with the morning winner.
The 2, tick chart above has some of the high value bars highlighted — these show large average trade sizes or Professionals.
As you can see, you want to follow the Professionals. They were buying the dips and shorting the rallies. Similarly, looking out for low value bars allows you to identify what the Amateurs are doing. The 2, tick chart above is exactly the same as the previous chart but with some of the low value bars highlighted. These show small average trade sizes or Amateurs. As you can see, you want to fade i. They were shorting the dips and buying late into the rallies.
With say a 3 minute chart the entry on close would have got you in closer to — or 5 points worse off! I would be profitable for 2 months and then boom, volatility spikes up and all of sudden, my trading is not good. Switching to tick and tick has completely masked the volatility differences and allows me to trade more consistently regardless of the volatility.
In the example above, the Better Sine Wave , my preferred cycle analysis tool, was able to pick out a Pull Back long entry point in the 2, tick chart. However, with the 3 minute chart the Pull Back was completely missed. Lastly, a tick chart compresses low activity periods, like lunch time and after-hours. Or fewer false break-out trades during lunch time.
You can read more about the CME and tick chart changes here. The CME introduced a new data feed protocol in December and all data feed providers have to implement it by October You can read more about the details in this forum thread and this blog post. The result is that the average Emini trade size has increased by a factor of approx. All the data providers, except eSignal, seem to have adopted un-bundled data and there appears to be almost no difference between pre- and post-MDP 3.
The average trade size is virtually identical and Better Pro Am continues to identify Professional and Amateur activity. If you are an eSignal user, we recommend using a tick bar chart instead of a tick bar chart, etc. The bundling of data appears to add a factor of 2. So on a tick chart when we plot volume there is no trade volume size. However, there is another option — futures Forex contracts traded on the CME. These contracts have grown quickly and are now large enough that they are representative of what happens in the cash Forex market.
The advantage of these futures contracts is that complete volume data is available and tick charts work great. No two tick data feeds are the same.