When using a platform such as Think Or Swim (which you see in most of our pictures), there are so many features these platforms offer the trader/researcher. This will obviously take many blog posts to go through everything, but tonight we will start with something simple; adjusting the chart to your style of trading/investing. There is just not one way to look at a chart setup, there are indeed many different ways. We will go over some of these ways below.
Day Trading - Short Time Frames
Now in a recent blog post, we went over the definition of a day trader. To sum it up, this is someone that is sitting in front of charts all day and is placing multiple orders to buy and sell. They are typically in a stock for a short time frame trying to catch quick profits.
Now the question is...... how might a day trader set up his/her charts? Please see the picture below before we get started.
As you can see from the picture above, there are ways to customize your charts. If you look at that drop down on the chart, it will further explain what we mean. Usually day traders are in and out of trades quick so they may want a chart thats just showing data from that specific day. If that is the case they could use the 1 D: 30M chart. Pretty much each candle stick represents 30 minutes worth of price movement. As you can see from the drop down, there are many different combinations you can use. You can even break it down to each candle stick being 5 minutes. If day traders have the candle sticks broken down to 30 minutes or 5 minutes each, this gives them a much better idea how the stock is trading throughout the day since their main concern is getting in and out quick.
Swing/Longer Term Trading
Now on the other hand, traders may want to analyze price movement on a longer time frame than just that certain day! They want to drag the chart out and see if there is potential long term opposed to opportunity only that day.
You can already see a difference from this chart compared to the one above. This chart is drug out much longer than the chart above. That's because this chart is looking at the prices over a year time frame instead of just 1 day! That's actually a huge difference, because now your looking at data from 365 days instead of just 1 day. Day traders above aren't so much concerned with yearly charts, because again they are trying to capitalize on opportunities on a daily basis compared to a long term basis like this chart represents. This chart above is the 1 Y: D chart which is the option towards the bottom on the drop down. It pretty much means all those little bars represent 1 day, but its analyzing those bars over a years time frame, which can give traders a better idea of longer term opportunities.
Main Points To Take
As you can see from our points above, there are many many ways to set up a chart from a time perspective. Shorter time frames can be used for day trading, where longer time frames can be used for longer term trading. Now the two we mentioned above are not the only ones available. You see that long drop down on the charts which offers many choices. You can even create your own time frames from that "customize" option on the drop down. Hopefully you are more familiar with setting up charts to begin looking at different time frames. You can always download a platform such as ThinkOrSwim and play around with these features. When we first got involved in trading, it was all about practice and seeing which strategies/chart setups worked best in our opinion!
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