Understanding Time Frames in Trading

A time frame is defined as the time duration during which one chooses to study a particular chart. Some of the popular time frames that technical analysts use are:

•  Monthly Charts

•  Weekly charts

•  Daily charts or end of the day charts

•  Intraday charts – 30 Mins, 15 mins and 5 minutes

One can customize the time frame as per their requirement. For example, a high frequency trader may want to use a 1 minute chart as opposed to any other time frame.

Here is a quick note on different types of time frames.

Time Frame	Open	High	Low	Close	No of Candles
Monthly	The opening price on the first day of the month	Highest price at which the stock traded during the entire month	Lowest price at which the stock traded during the entire month	The closing price on the last day of the month	12 candles for the entire year
Weekly	Monday’s Opening Price	Highest price at which the stock traded during the entire week	Lowest price at which the stock traded during the entire week	The closing price on Thursday	52 candles for the entire year
Daily or EOD	Opening price of the day	Highest price at which the stock traded during the day	Lowest price at which the stock traded during the entire day	The closing price of the day	One candle per day, 252 candles for the entire year

As shown in the table, as the time period decreases, the number of candles (data points) increase.

The data could represent either information or noise. As a trader, you must separate signal from noise. For example, a long-term investor might benefit from examining weekly or monthly charts as they provide more information. In contrast, an intraday trader who executes one or two trades each day would benefit from viewing end-of-day (EOD) or 15-minute charts. Similarly, 1-minute charts can provide a great deal of information for high frequency traders.

Therefore, based on your trading posture, you must select a time range. This is of the utmost importance to your trading success.