August 27, 2007 at 11:17 am | | Comments 0

Reduced Trading Timeframes

With so many sharp and sudden reversals taking place recently, it’s certainly the kind of market in which one can easily overstay their welcome. They say that “bulls make money, bears make money, but pigs get slaughtered.” Well, this is no market for pigs. That trade you just nailed might suddenly reverse and erase all your gains. In the trading world, you always have to stay vigilant with your trading capital, but that’s particularly true right now.

Lately I’ve mentioned quite a few times to members at how reducing trading timeframes is important in the current market environment, and I want to just take a moment to explain what I mean by that. It’s certainly not a phrase which is exclusive to me, but what does it mean exactly to reduce your timeframe as a trader?

To me, there are a couple of ways to do it. The first is to simply reduce your holding time for the types of trades you like to take. Whether you’re trading the long side or the short side, this tape is offering opportunities for you but you have to be very quick or else it’s easy to give some back. Reducing your trading timeframe can simply mean to book profits quicker once you start to get that good move you planned for.

Another way to reduce your trading timeframe is to zoom in on the chart. If you typically look at the daily charts but you’re finding very little to work with, zooming in your timeframe to watch the intraday price action might offer more setups. Of course, you’re looking more under the microscope, which means you’ll also have to expect smaller moves as a result. However, the same chart patterns which work on the daily charts can be found intraday and they tend to play out the same way. Breakout plays, buying pullbacks to support, and short selling at resistance can still be done on the 30-minute or even 5-minute charts. This can offer a continued flow of trades if you still have the itch for activity.

Regardless of your timeframe though, remember to stick with a plan. When headfakes are as prevalent as right now, frustration can set in more easily and cause you to overtrade. Know what you’re going after on a given day, and only take the trades which fit your criteria.

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]

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