Day traders analyze many different things at once to aid in their entries and exits.
You probably have a basic understanding of the importance of price action, technical analysis, indicators, and volume.
But one of the most important skills of profitable day traders that few talk about is how they align their analysis and strategy on multiple-time frames.
Many new traders fail to take into the bigger picture trend of a stock when making day trades, and make uninformed trades that lead to losses. They focus TOO much on the 5-minute or 1-minute chart.
This blog will show you how to develop this crucial skill so this doesn’t happen to you:
What Does It Mean To “Align Stocks On Multiple Time Frames”?
Aligning stocks on multiple time frames basically means having the skill to take multiple different time frames between a 5-minute chart and a daily chart, and analyzing them all to make sure that they all show the same image to support your trading thesis.
This video lesson from veteran trader Kunal Desai will show you how he has been using this skill for his past 15 years of day trading full-time:
What Should You Do As A Trader To Make Sure You Are Aligning Multiple Time Frames Correctly?
What you want to do as a trader is have at leas 3 time frames you reference in between your smallest time frame chart (like a 1, 2, or 5 minute chart) all the way up to the daily chart, and make sure that they all tell the same exact story when you are entering a trade. If you are looking to short a stock, all of those time frames MUST be lining up for a short or have room to go downwards to the next support level, and vice versa for the long side.
Too many traders fall into the trap of just staring at short-term time frames all day long, and never ‘zoom out’ to look at the bigger picture. What we have found over our years of trading is that when a stock maybe has a buy trigger on a shorter-term time frame like the 5-minute chart, but the daily chart is in a down trend, you will have a less likelihood of the trade working in your favor because you are going against the trend on another time frame.
Avoiding Paralysis By Analysis
On the flip side of this equation, don’t fall into the trap of analyzing too MANY time frames. Try to stick to 3 different categories of your time frames:
Intraday Time Frame: 5 minute charts for intraday trends
Intermediate: 1-hour charts
Long Term: Daily charts
Weekly and monthly charts are great to look at as well, they tell you the trend of the stock for the past several years.
As a day trader there is so much you can analyze at once and add to your charts. Nothing will beat analyzing multiple time frame charts at once and making sure they all align properly. When you have 3-5 time frames all showing you the same setup and the same potential direction for the stock to go with no conflicting time frames, the likelihood of that trade working is extremely high.
On every single trade, making sure you have multiple time frames supporting your trade idea will already place you ahead of 99% of other traders. We dive more into this key concept in our Live Trading Boot Camp, where we teach you specific day trading and swing trading strategies to use to align on multiple time frames!
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