But then, that happens to us all from time to time. Life has a habit of failing to consult with us, prior to messing with our plans.

 

What happened? Well, before I was trading I used to work as a pilot, with a specialty in aviation safety. I've maintained a link to that industry, and still do some work on a part-time basis. Usually it's not a big deal at all, and I can fit it in around my life. Sometimes though, a bit of a crisis happens (safety's like that!) and I've got to travel away, and well… my plans just don't matter anymore.

 

Yeah, I know. I've got no-one to blame but myself. After all, I choose to do this. And this probably has no relevance to your life. So let me get to the point – how does this story relate to the title of this article – ‘Trading Timeframe Selection'.

 

Ok, those of you who have been around my website for a while know that day-trading is my thing. I like the short timeframes. Anything more than 5 minutes is way too long for me. Why is that? Well, several reasons really:

1. More action.

2. Tighter stops (I hate large losses).

3. Psychologically, I'm a bit of a control freak – I like to monitor a trade from start to finish.

4. I can sit in cash when I'm not trading, so it's no problem if I get called away and can't trade for a day or two.

Really, it's all psychology!

 

I used to trade daily charts several years ago, and really hated the ‘surprise' each day when I woke up to see what the US market had done to my position overnight. Now, when I'm trading, I can manage the trade closely. And when I'm not trading, I'm out of the markets. Simple!

 

Day-trading is just a perfect fit for my psychology. And it just happens to fit my lifestyle as well, because if I have to go away quickly I'm not leaving open trades in the markets.

 

For some crazy reason, about six weeks ago, I decided that I should look into trading daily charts again because that would give me more time to work on the trading education website & newsletter. I decided to trade options on equities, which would allow me to place defined-risk trades and profit from theta decay. Great plan! So I set about simulation trading for a couple of months, just to be sure it would work for me. Well, everything went fine until this week.

 

Suddenly, I couldn't monitor my trades. I'm left in the market with an overall delta positive portfolio, and no access to a computer to adjust the trades, and the Dow drops 358 points. Not a big deal really, as it's simulation. The position had been in profit, and is only sitting on a slight loss now, so with three more weeks till expiry there's still a great chance to work my way out of trouble. Of course, had it been live I would have phoned my broker and closed out all positions.

 

But here's the real lesson for me:

 

1. Daily charts do not match my lifestyle,

2. Daily charts do not match my psychology, and

3. Daily charts do not match my risk tolerance.

 

I wasn't comfortable holding positions overnight when I couldn't monitor them. And the whole ‘speed' (or lack of speed) of the game frustrated me. Could I get used to it? Absolutely! But why bother when I've already found my niche. I'm a day-trader. Why try to change?

 

So, what's your perfect timeframe?

 

The only way to find out is to try the different alternatives. These days you can get a demo or simulation platform for almost every market, and timeframe. So there's no excuse for not trying the different timeframes to find the one that fits your psychology like a glove.

 

Try the short timeframes for a couple of weeks. Try the intermediate timeframes for a month or so, say the 1 or 4 hour charts. Try the daily charts for a couple of months. While you're at it, try the weekly charts.

 

What you're first attracted to is not necessarily the right fit for your psychology or lifestyle. When I first got into trading I traded the weekly charts on stocks. This changed quickly to daily charts. And then over several years it progressively got shorter and shorter. Maybe day-trading would not have suited me back then, but the thing is, I never even thought to try anything else. Had I done so, I might have saved myself years of ‘daily chart' pain.

 

So what are you waiting for? Test your timeframes, and find the right one for you – the timeframe that matches both your lifestyle and your trading psychology.

 

Happy trading,

 

Lance Beggs

 

© Copyright 2008. Lance Beggs. All Rights Reserved.