Blending Time Frames
by Linda Satterfield
The stock market has worlds within worlds, if you think about it — time frames within time frames, all
interlinked and interdependent. The problem is, if you look at too small a time frame, you could find
yourself drowning in minutiae, and if you look at too large a time frame, you could find yourself missing
signals of opportunity. There must be a way to equitably look at situations both large and small without
getting bogged down. Linda Satterfield has a few suggestions.
For many traders, monitoring intraday charts can be an exciting experience. It's an upgrade into a
fascinating world of easily accessible knowledge. Before computers, the world of intraday activity could
only be laboriously perceived by keeping charts by hand. Now, with the touch of a button or two, a trader
can zoom into a one-minute bar chart or back off to the larger perspective of a monthly chart. If the label
and prices are removed and the scale adjusted, it is impossible to tell which time frame is on the screen.
Such a wealth of information can be overwhelming and quite likely to result in a paralyzing situation for
the unprepared trader. Which time frame is best for routine trading? Where are the best signals? Is it
better to day trade or r stay a month? Is it possible to suffer from time frame myopia? Is it better to act
now or wait for the five-minute chart to go overbought? These are only a few examples of what could
turn out to be difficult and uniquely personal questions. Trial and error can be an expensive learning
experience in a fast-moving market.
By understanding the framework of the market, some of those choices can be simplified and understood
better. Here are some guidelines for integrating the different time frames into a cohesive market
overview, with an example of the dynamics of the relationships.
Each time frame is inextricably related to the pattern in another. For example, a bearish double top on a
five-minute chart can be part of a triangle pattern on a 60-minute chart, which in turn can be part of a topping pattern on a daily chart, which again, in turn, can be the right shoulder of an inverted head and
shoulders pattern on a weekly chart, which (yes, again) could be a prelude to the third wave explosion on
the monthly chart. The action at one level will have implications on the others. What might be a small
splash on the monthly chart could become a tsunami on the five-minute chart.