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He has provided education to individual traders and investors for over 20 years. Article Reviewed on July 28, Gordon Scott Updated September 17, New traders often wonder which time frames to watch while day trading stocks. Do you use tick charts and a five-minute chart for context, or is it better to how to watch trading signals a one-minute chart instead? Is a minute or hourly chart more effective at monitoring major support or resistance levels created over the last several days?
Before answering these questions, it's worth noting that the best time frames to monitor and trade should be laid out in your trading plan.
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If you haven't created a trading plan yet, use this information to learn more about your options for day trading strategies. If you already have a trading plan, it's time to scrap the confusion and learn about the best time frames to watch while day trading. Chart Time Frames Don't Change Market Volatility If you hear someone say " one-minute charts are too volatile," don't take advice from that person.
How data is viewed doesn't change how volatile a market is—all that changes is how much information you see. A tick chart shows the most data because it creates a bar for each transaction or a specific number of transactions, such as 30 or One-minute charts show how the price moves during each one-minute period.
A five-minute chart tracks price movement in five-minute increments.
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The five-minute chart isn't less volatile than the one-minute, even though the chart may appear calmer. Each five-minute bar is equivalent to five one-minute bars. The one-minute chart may appear more erratic, but that's only because it reveals more detail about trading.
Which Time Frames to Monitor Just as time frames don't options strategies rating volatility, time frames don't impact the information you see—though they will display that information differently. Shorter time frame charts reveal more detail, while longer-term charts show less detail.
The detail is still included in the long-term chart, but the chart zooms out to emphasize long-term trends rather than short-term detail. When day trading stocks, monitor a tick chart near the open. So many transactions occur around the market open that you could have several big moves and reversals within a few minutes. These are tradable moves, but they occur so quickly that traders may miss them if they're viewing a one-minute chart. Despite the high volume of trading, only one or two one-minute bars may have business ways to make money, how to watch trading signals it difficult to determine trade signals.
On the other hand, traders viewing tick charts may have 10 or 20 bars form within a couple of minutes after the markets open, and those bars could provide multiple trade signals.
This scenario is especially likely when trading high volatility stocks.
Once you determine the number of ticks per bar that best suits the stock you are trading, you can continue to trade off the tick chart throughout the day. It provides the most detailed information and will also let you know when nothing is happening.
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If only a few transactions are going through, it will take a long time for a tick bar to complete and for a new one to begin. A one-minute chart, on the other hand, will continue to produce price bars as long as one transaction occurs each minute.
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This can create the illusion of activity during slow trading periods, but traders who see that the tick chart isn't creating new bars will know there is little activity. Therefore, they may decide that it's better to sit on the sidelines day traders want movement and volume—those factors boost liquidity and profitability.
As the Day Progresses, Extend Your Time Frame As the day progresses, your tick chart is going to accumulate a lot of bars, especially if it is a volatile and high-volume trading day.
This can create too much detail. When zoomed in, it may be difficult to see the entire price range for the trading day or even the entire current trend.
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That is when it helps to open a one-minute or two-minute chart. It acts as a summary of the tick chart, giving traders more context about the activity.
The one-minute and two-minute charts are especially helpful in assessing trends, monitoring major intra-day support and resistance levels, and noting overall volatility. EST, just before the New York lunch hour. The lunch hour is typically quieter, so day traders usually take a break, as there are fewer quality trade opportunities.
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Day traders will resume day trading after the lunch hour. Some traders begin around 1 p. EST, while others prefer to wait and resume trading closer to the market close. In either case, the tick, one-minute, and two-minute charts may not show the entire trading day or, if they do, the chart will appear squished.