Official Terminology

Time frame is broken up into two meanings, and it is key to consider both when creating a proper analysis.

Chart Time Frame - Basically the time span your charts covers (i.e. 5 days, 3 months, 10 years, etc.)

Personal Time Frame – The time span you would like a stock to perform. Are you willing to hold on to the stock for a couple days, months, or years? Obviously each trader has their own preference.

Overall Concept

The idea of time frame essentially means the span your particular stock chart ranges. Depending on the service where you charts are located, will usually determine how far back you can look back. For the most part, all the charts can go back to at least 10 years of historical data.

Reliant on what trader you are, will a suitable time frame be found:

• If you are a day-trader, then you would most likely break down charts in spans of minutes.
• If you are a swing-trader, then you would probably utilize time frames of days and months.
• If you consider yourself more of a buy and hold trader, then you would be better off looking at time frames of a year or more.

When looking at chart it is important to remember the time frame. The overall goal of technical analysis is finding patterns.

Lets look at a quick example:

Say we are looking a 1 year time frame of Stock A. We noticed a particular trend that peaked after two months. Eventually the stock broke below its support. If we remember our price targets for support, then we know that more than likely the stock should bottom out somewhere around that previous peak. Taking our 1 year time frame into consideration we should expect that bottom somewhere around 2 months.

So if two months fits into your personal time frame, then perhaps you may take a short position here; however, if you are looking to jump in and out of stocks within days, then Stock A most likely isn’t the right play for you.

It is important to remember that what looks like a pattern at one time frame won’t necessarily stand in another. That is why different type of traders use different time frame. If we were day-traders, then we wouldn’t care what happened with Stock A over a 5 year period.

Quick Check: You are a buy and hold trader analyzing Stock B. We saw a great bullish pattern at a 1 month time frame. What would you do?

Answer: While a bullish pattern may seem like sign to entry, you have to remember that as a buy and hold trader you prefer to hold on stocks for longer than a couple of months. In order to see if Stock B is the best play, you should proceed to check if these bullish sentiments still pan out through longer time frames.

It is common for traders to use multiple time frames. Many traders like to use a long time frame to see if a stock looks right, then shorten the time frame to see where some exact buying points would be.

Concept in Action

In order to better understand the idea of using the right time frame, below is a video that will help explain this. While the entire video is great for any trader, if you just want to see multiple time frames in action, then fast forward 5 minutes into the video.

Important Notes and Reminders

• Find out what time frame is suitable for your trading style.
• To create more accurate trades, use multiple time frames when analyzing a stock.
• Different time frames can produce different results for the same stock.

Using multiple time frames can drastically create more accurate trades. Make sure to note your personal time frame and then analyze the right chart time frame(s).