V.10:4 (151-154): Blending Time Frames by Linda Satterfield

V.10:4 (151-154): Blending Time Frames by Linda Satterfield
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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.

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