Significance of weekly/monthly charts?

sh50

Active Member
#1
"Five minute bar charts are used by day traders, hourly or daily by swing traders, weekly charts by investors."

How exactly does the investor use the weekly chart? Should he see that the price is above the 30 week moving average or greater than 200DMA in the daily chart? What else should he see? Any oscillator? Looking at it one way, investing is nothing but trading on primary, isn't it?

"Monthly and weekly charts are chiefly used for determining important support and resistance levels and making long-term trends" How exactly does one use them?

During intra-day trading, I learnt that one is supposed to use end of day charts to mark support and resistance and see whether or not they are penetrated during the day.

Simmilarly are the supports and resistances marked on weekly charts monitored non a daily basis for end of day trading-whether they are penetrated or not?

Monthly charts are strictly for primary trend I suppose but they seem quite useless for end of day trading.

Please clarify, Traderji. Thanks
 

sh50

Active Member
#3
Thanks once again, Traderji. Very Useful article. Can you explain this from the article:-

The same idea applies if you are trading any security on a daily basis, in which case, the weekly bars will be the basis for the trend as well as the important support and resistance points

What does the word daily imply here- end of day or intraday. I would presume end of day. In Intra day I was taught to use end of day resistances and supports and see whether the intra day priced crossed them or not?

How does Technical analysis help an investor when one says that "fundamentals tell you what to buy and technicals when to buy.and sell? I know about the price being greater or less than the 200 moving average.Can you add to that ? If one had a delivery of a few stocks, what all one should see?
 

Traderji

Super Moderator
#4
Daily refers to end of day.

TREND is the single most important factor to watch out for. If the trend is UP one can go long or hold on to their long positions. Once the trend turns down one should be out of their long positions and go short.

Trading with the trend is hard to do because a logical give-up exit point will be farther away, potentially causing a larger loss if you are wrong. This is a good example of why so few traders are successful. They can't bring themselves to trade in a psychologically difficult way.

When you trade in the direction of a trend, you are truly following the markets rather than predicting them. Most unsuccessful traders spend their entire careers looking for better ways to predict the markets.
 

sh50

Active Member
#5
Basically you see a higher market time frame( say end of day supports and resistances) and see whether they are penetrated or not in intra-day, isn't it? Similarly weekly Supports and resistances are penetrated end of day or not?

Please be specific on how an investor can use Technical analysis. Thanks.
 

sh50

Active Member
#6
This is very specific and to the point-beginners should appreciate.

It is much easier to see the major trend using weekly data, find the short-term direction on daily data, and time your entry using hourly bar

When the weekly trend is up, daily declines point to buying opportunities. When weekly trend is down, daily rallies point to shorting opportunities.
 
C

CreditViolet

Guest
#7
The problem with daily charts if u r trading intraday is that u get to look too far back.With weekly one it gets prehistoric i feel.
Lets look at an example
If say I have a system for daily bars and i use a trailing stop to lock in the profits after say 3% of opposite move.If the market moves higher then our trailing stop moves higher.This sounds good theoretically but this stop mechanism needs to know what occurred firstthe high or the low of the day; did the market open and then move higher and pull our trailing stop up and then move down and stop us out? Or did the market first move down and stop us out and then move up and make new highs? This type of information cannot be discerned from a daily bar.
The point i am trying to make is that daily and weekly charts give u a very unrealistic feel while trading intraday.Ofcourse they r useful to determine long term trend and key levels but they have serious limitations.
Also many people overlook the importance of intraday historical data.Fibonacci traders know this well while drawing retracement levels.The retracement levels are completely different when drawn on different time frames.
I figured out a year ago that systems backtested,optimized and curve fitted on daily bars look very rosy and show excellent performance but when they are tested on intraday bars which is when u actually trade the performance deteriorates considerably.It was very painful to watch all the work go down the drain. :mad:
Weekly charts are useful and u wil also see that many indicators actually show good performance in them but for intraday traders like me they dont offer much.If u r a investor then weekly charts are definitely for u but not otherwise
 
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#8
So what is the right time frame for you? Well, it all depends on your personality.

You have to feel comfortable with the time frame you are trading in. You have to feel at home with that time frame. There is always a degree of pressure when you trade because there is the real potential for loss or gain and that will effect you to some degree. You should however not feel that the reason you are feeling pressure or frustration is because things are happening so fast that you find it difficult to make decisions or so slowly that you get frustrated.

The question is if you could make the same amount of money trading any time frame which time frame would you choose. You will of course have to take into consideration that the time frame you choose does generate enough trading opportunities for you to be happy with the results.

It is also worth noting that if your trading is going well and you are profitable then don't even think about changing time frames. As the saying goes ''if it ain't broke don't fix it.''

When you do eventually find the time frame you are happy with you can then start looking at multiple time frames to help your analysis of the market.

I currently invest/position trade using the TradersEdgeIndia.com Multiple time frame trend trading newsletter and I am extremely satisfied with the results.
 

sh50

Active Member
#9
These are very good tips for people like me who are new to technicals. Let me rephrase the earlier post(for swing trading) for intra-day trading

It is much easier to see the major trend using daily data, find the short-term direction on hourly data, and time your entry using five or ten minute bar. Hope this is corrrect. I have not done much day trading.

When the daily trend is up, hourly declines point to buying opportunities. When daily trend is down, hourly rallies point to shorting opportunities.

What about position trading. Monthly charts are too long term? Isn't swing trading a kind of postion trading only although there are three main categories-day,swing and position.
 
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#10
I have just got into tech. analysis and I notice that monthly charts are too late. For my kind of investing I prefer to see the weekly charts and daily charts.

Using sh50 concept here I watch the weekly trend and look for buying opportunities using the daily chart.
 

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