Learn With ETMarkets: Choosing the right time frame in technical analysis
Technical Analysis and acquiring knowledge of different chart scales, including Arithmetic and Semi-Log, Maya started examining a multitude of price charts across various assets.
Some charts displayed continuous activity round the clock, such as forex, while others, like stocks, were only active during exchange hours. With daily charts as the initial point of reference, Maya found herself eager to explore other timeframe charts and gain a deeper understanding of their utility.
That's when she decided to seek guidance from Dev, who was always enthusiastic about discussing his passion.
Maya inquired, «Hi Dev! As I've been poring over multiple charts, I find myself a bit confused about which timeframes and data intervals are best for charting.
Could you help me understand what to use for different types of analysis and what considerations to weigh when making these choices?»
Dev responded, «Absolutely, Maya! It's crucial to appreciate that timeframes and data intervals lie at the heart of technical analysis. They play a pivotal role in determining the level of detail and the duration of data under examination.
For instance, when you study daily bar or candlestick charts, you're essentially scrutinizing just four price points: the open and close prices for the day along with the highest and lowest prices. These charts provide a broader picture, but they don't reveal the finer nuances of how price movements occurred within that day.»
Maya inquired further, «I'm focusing on daily charts, so it means intraday trading is impractical due to the absence of intraday details on the chart.
