- The types of technical analysis based on the time frame are: short-term analysis, medium-term analysis and long-term analysis
- In candlestick charts, each candle represents a time frame that can be changed from 1 minute to 5 minutes, a day and even a year.
- Choosing the right time frame depends on the personality of the analyst, available time, trading strategy and also, the amount of capital of the trader
- The smaller the trader’s capital, the less recommended it is to use long time frames
- In markets with low trading volume, it is recommended to use larger time frames
- The most appropriate way to use time frames is to use multiple time frames or multi-times.
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Choosing the right time frame when analyzing the price chart is one of the reasons for the success of traders and analysts. Because the inappropriate selection of the analysis time frame confuses the traders and prevents them from getting the expected returns. First of all, all analysts should choose the time frame of their analysis correctly, depending on their trading strategy and the behavior of the market in which they trade.
The types of technical analysis based on time frame are: short-term analysis, medium-term analysis and long-term analysis. In candlestick charts, each candle represents a time frame that can be changed from 1 minute to 5 minutes, a day and even a year. In the article “Introduction of Japanese candles” you can learn about the types of Japanese candles. For additional information, we suggest you read the technical analysis training article.
In the above figure, you can see the price chart of Kaveh trading symbol in the daily time frame, where each candle represents one day. To select a time frame, use the specified field in the chart. The right timeframe is different for every trader. Newbie traders who dream of getting rich fast generally use small time frames.
But these people fall into the trap of short-term fluctuations very quickly and lose their entire capital. Not using long-term timeframes results in missing valuable information that can be seen on a long-term chart. Also, some traders cannot achieve the necessary returns due to improper selection of the long-term time frame or may lose their entire capital due to high price fluctuations.
How to choose the right time frame in technical analysis
The right choice of time frame depends on the personality of the analyst, available time, trading strategy and also, the amount of capital of the trader. The smaller the trader’s capital, the less recommended it is to use long-term timeframes; Because although these timeframes can have large profit limits, they also require large loss limits.
Therefore, the amount of traders’ capital should have the necessary tolerance against market fluctuations. Choosing the right time frame and trading volume is very effective in technical analysis. Also, the trading market environment has a significant impact on choosing the right time frame. For example, in bilateral markets where the number of traders and trading volumes are high (in such a way that we see many buy and sell orders in a fraction of a second), some traders even choose a 1-minute time frame to take full advantage of market fluctuations. .
◊ Be sure to read this article: fundamental analysis training from zero to hundred
But in markets where the volume of transactions is small, it is recommended to use larger time frames. The most appropriate way to use time frames is to use multiple time frames or multi-times. In this way, in the long term, determine the direction of the price movement and the perspective of the market trend so that you can consider a wider time horizon. Then, use the short-term timeframe to choose the best entry and exit points. Because if the analyst knows how the price situation is in the long-term perspective, he will gradually gain a lot of mastery over the short-term periods.
When you only use a short-term chart, you will not be able to find out why the trend continues or reverses. Also, if you only use the long-term chart, you will not be able to make a proper entry and exit. In the table below, we have introduced the appropriate time frames for analyzing and identifying the direction of the general price movement and the appropriate entry and exit points according to experience, which can be a good guide for analyzing the chart in the appropriate time frame.
In the above chart, we can recognize the general upward movement in the three-month period and at the same time as the previous ceiling was broken. In this case, the buy position is achieved.
In the above chart, by changing the time period in the total index chart on a weekly basis, the best entry points can be well identified. In this article, we tried to have a quick overview of trading times and how to use multi-times. Now you can read further articles with deeper insight.