Most traders whether new to day trading or experienced have questions on which time frame is best for day trading. Day traders depend on trading volume and liquidity to identify the proper patterns and make swift profits. Volume measures the number of shares of a stock that are traded on a stock exchange in a period of time. Liquidity is being able to find a buyer for a stock paired up with a seller who is willing to sell and vice versa for every transaction. Volume is important because it can help day traders confirm directions the market is moving and when to get in and out of positions.
Day traders take positions based upon their analysis of a stock’s possible price direction within the trading period. While volatile periods and volume are definitely important in understanding the time of day are most profitable. It is also important to know which time frame is best for day trading. Remember, your charts will determine your entry and exit points, so you want to make sure you have the best map to help guide you in your day trading.
Charting Time Frames
A time frame is an interval that creates a new price bar; in which candlesticks will form on whichever one you chose. The time frame you use for trading defines the amount you’re risking on a tread and the amount of time you’ll be in a trade. There are many options when it comes to time frames to use for day trading when setting up your chart. Chart time frame examples are 1-minute, 5-minute, 15-minute, 30-minute, and 60-minute. I will aid you in the key elements to help select the best time frames to day trade and use with your strategy.
Making mistakes can happen, but it is not the goal. This is why attention to detail is so important when it comes to day trading. Developing strong attention to detail makes you more effective and increases your productivity; it also reduces the likelihood of error. Smaller time charts can take a few minutes to play out, and you can be in and out of the market fairly quickly.
Smaller Time Frames
Smaller time frames (1 min) give more detail, while Longer time frames (15 min) give less detail. Longer time frames appear to be smoother looking because not as many candles have formed. 5-minute charts are more in between the 1-minute and 15-minute charts when it comes to providing information. I personally like to use 1 min and 5 min charts for day trade. I will break down why both of these time frames are the best for day trading.
Longer Time Frames
Longer time frames (1 hr, 2 hr, D, W) are used as confirmation tools; they can identify vital resistance levels that have been used over time. A combination of the slow and fast time frames helps create a big picture on price action. This picture will be helpful when looking for entry and exit points. Think of each time frame as another link you can use to help you grow; just like a chain would grow, adding more links to it.
1-Minute Chart
The great thing about the 1-minute chart is that the candlesticks are generated every minute. A 1-minute time frame chart gives detail on the price movements and potentially getting in and out of short-term trades that only last a few minutes. With trades based on smaller candles than the higher time frames, stop losses and profit targets tend to be smaller than those used by higher time traders.
1-minute chart traders typically have the opportunity to take more trades per day than larger time frames. More trades translate to more profit and faster compounding of your account. I use the 1-minute charts to draw my support and resistance lines. I also set it up on my thinkorswim platform, whatever I draw on my 1-minute chart will mirror my 5-minute charts; this can be seen in the image below.
5-Minute Chart
Sometimes you stare at one time frame so long, that you forget what the chart might look like in another time frame. The highest probabilities setups occur when several time frames are in sync with one another in day trading. Sometimes looking at multiple time frames will change your predisposition completely. You may be looking for entries to get in on your 1-minute chart, and the view of the 5-minute chart will help you to keep from entering or might confirm the entry point for you.
Traders try to take the upper hand on minor price movements by buying low and selling high in a very small window of time. Candles form every five minutes; so, there is more time between data points. A 5-minute chart focuses on bigger intraday trends; which the point of this is to look for momentum. The advantage of longer time frames is that you have a much better picture of what is driving the price in the long term. A stock can often vary 5% over the course of a trading day. It then can settle back to its opening price at the close of a trading day.
Summary: Which Time Frame Is Best for Day Trading?
Time is money, this phrase has been the understanding that saving your time is equivalent to saving money. In day trading, it becomes even more evident that once the time is lost, it cannot be regained. So, that is why it is important to know what time is the best time frame to use to day trade. You learned that the 1-minute and 5-minute charts are the best time frames, ideal for day trading. Let the trades come to you, don’t go out there chasing them and make hasty decisions. The charts will give you the reassurance you need to know when to enter and exit trades effectively.
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Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
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