A Different Beginner Time Frame Question

[cristiano]

Slightly different focus than target_300k's thread on timeframes - I wanted to get opinions on whether a trading plan should work more or less as well on different timeframes.

To expand - I have put together my trading plan based on what I have read in books and also from much I have learned from experienced traders here on the forum. That said, I get the impression most guys here are day traders and so I'm starting to think this may have biased my plan.

In reality my trading will be much longer term as I will initially only be trading before/after work. Do you guys think taking a plan that has probably focused on day trading should also be applicable to longer term trades (days or weeks at a time)?

 

[Rhody Trader]

From my perspective, time frame is an integral part of your trading plan. It helps define it. As such, it's illogical to think in terms of a trading plan independent of time frame. That said, I know what you're driving at. My inclination is to say it's not a plug-and-play sort of thing. The things day traders need to have and focus on are not necessarily the same as those required by swing or position traders.

 

[cristiano]

Thanks Rhody. Everything I read about trading plans emphasises designing one around your personal situation, such as time you'll be trading. That must have fallen by the wayside at some stage. Think the best thing to do is test it out and see for myself

 

[Rhody Trader]

Everything I read about trading plans emphasises designing one around your personal situation, such as time you'll be trading.

You must have been reading my book!

 

[fayalac]

Longer time frames does not mean more profit.
Longer time frames mean, simply, more security on your trading since you dont rely on temporary adjustments. Take as an example a 250 pips down trend - at any pair -, if you are following 5 or 15 min charts, and you are not so skilled when the price make a temporary adjustment - which you can foresee and follow with fibb - you´ll probably get out of that position at lets say 100 - 125 pips, take the opposite order and probably lose the pips you just made, and if not instead 250 pips you´ll probably get 150 - 200. If you hold your position at longer time frames you can capitalize long runs, but you take higher risks.
It depends on your method.

 

[hokid]

No one method is suitable to different time frames.

 

[HowardCohodas]

Thanks Rhody. Everything I read about trading plans emphasises designing one around your personal situation, such as time you'll be trading. That must have fallen by the wayside at some stage. Think the best thing to do is test it out and see for myself

Takeoffs are optional. Landings are mandatory.

You may be able to design a trading plan where you enter the trade during the hours you are available and use automated stop losses and trailing stops to avoid serious losses and protect your wins while you are at your job.

 

[mudder1310]

It's not just the mechanics of the system, but the trader personality as well. I'm not good with short time frame, it makes me anxious, but the system I use will function the same on 5m or 4hr, so I stick with longer times because I handle them better.

Another thing to consider is if you're interested in carrying trades over from day to day. I wouldn't want to carry over a weekend, but there are plenty who do, and do well.

 

[cristiano]

Thanks for the suggestions all. Have been looking at this recently while have had more time and maybe there's a benefit to someone like me still learning - I think it has made me think more clearly about where I want to enter and exit a trade.

The benefit being that hopefully there'll be less chance of fitting my thinking to a lower TF chart and more focus on letting the price come to where I want to enter. Plus setting limit orders might reduce some of that stress you refer to mudder.

Thanks again, let's see how this works now...

 

[oiltanker]

i find the risk on the longer tf can often be the same as the shorter but the potential is for bigger gains.

 

[cristiano]

Longer time frames does not mean more profit.
Longer time frames mean, simply, more security on your trading since you dont rely on temporary adjustments. Take as an example a 250 pips down trend - at any pair -, if you are following 5 or 15 min charts, and you are not so skilled when the price make a temporary adjustment - which you can foresee and follow with fibb - you´ll probably get out of that position at lets say 100 - 125 pips, take the opposite order and probably lose the pips you just made, and if not instead 250 pips you´ll probably get 150 - 200. If you hold your position at longer time frames you can capitalize long runs, but you take higher risks.
It depends on your method.

That's a good point - I'm fairly risk averse so perhaps that's why I initially focused more on lower TF where I can enter with less risk. That said, it's a trade-off between smaller profits and higher frequency trades, which doesn't suit me right now.
Might have to face up to low frequency and low (potential) profits for now.

 

[Rhody Trader]

I'm fairly risk averse so perhaps that's why I initially focused more on lower TF where I can enter with less risk.

Shorter time frames means generally smaller price movements, but that isn't the same as less risk. Risk is a function of the size of the market move and the size of your position. You can take less risk in longer-term positions just as you can take greater risk in shorter-term ones. Don't let yourself fall into that shorter time frame = lower risk trap.

 

[oiltanker]

more trades = more risk

 

[Rhody Trader]

more trades = more risk

Actually, more trades can mean less risk. The more trades you do the more your performance is likely to reflect the projected average performance of your system. Of course, if you've got a negative expectancy system then that's bad. :cheesy: