Which Time Frame You Should Consider For Day Trading & Positional Trading?
You eat Butter Toast, Aloo Parathas in the morning and savour the flavour of delicacies like Butter Chicken & Dal Makhani before you go to sleep. So it won’t be wrong if we agree that you eat different types of food both for breakfast and dinner. Then why do most of the new traders keep their time frame stuck to one style when it comes to intraday and positional trading. In this article, we help you understand which time frame you should consider for day trading and positional trading.
Why Discuss Time Frame Only For Intraday & Positional Trading?
We will be discussing the time frame for only these variants of trading because:
- These two are the most popular ones. The third one is investing, and time has hardly any role in it. You just have to consider the fundamentals and trust the process of time.
- Most novice traders don’t stick to one time frame when it comes to trading. They apply the same time frame to both positional and intraday trading.
Defining Time Frame Before Distinguishing It
For ease of understanding, before we proceed further, let’s get one thing clear – what do we mean by the time frame in trading?
In context to this blog, the time frame would mean a combination of these few things:
Before entering a new trade (whether intraday or positional), any sane trader would look at the underlying security chart. The duration for which we see the charts on our screen would be an essential part of the time frame we choose for trading.
Some of the most popular time durations available are marked in the snapshot below:
Managing The Open Trades
Some trades are just a tandem of black and white, that is, either buying and selling or selling and buying. Others contain some grey, or in simple terms, averaging. The interval you keep averaging a trade (buying or selling) depends on your time frame horizon. Many average their trades based on the hourly charting activities. Some people average their trades every week. But in the end, the crux is to choose the best time frame for the preferred way of trading.
Similarly, when you have to average your trades, you have to exit them at some point, whether they are meant to be positional or intraday. The interval at which you exit your trades would help you define the time frame of your choice.
The Best Time Frame For Intraday Trading
Before we identify the best time frame for intraday trading, we need to understand what intraday trading in particular is. Although many of us are already well-versed with intraday trading, our new fellow traders need to learn this.
What is Intraday Trading?
When you enter and exit, a trade between any day’s trading hours is called intraday trading. For our Indian equity markets, the intraday trading hours are from 9:15 A.M. to 3:30 P.M.
Now talking about the perfect time frame for intraday trading, we need to understand that we have a limited time slot for executing our trades. You can’t use one day’s time frame to trade on an intraday basis. Also, we need to divide our intraday trades into two broad categories: Scalping & Conventional Intraday trades.
Scalping & Time Frame:
As we all know, Scalping refers to taking a fiery quick entry and exit and has a lower hit rate than any other trading strategy. Now moving forward to our time frame choosing, you can’t scalp on a 15 minute or even 5-minute time frame.
To successfully align your trades with the genuine direction of the market, you should try trading on 1 minute and 3 minute time frames. Also, when you trade on the minimalistic 1-minute time frame, you need to understand that your target and stop losses would be negligible.
- Conventional Intraday & Time Frame:
Now that you know about scalping and its preferred time frame. It’s time to talk about intraday trading. Broadly, when we trade intraday, we wait for our targets to hit for about five minutes to three to four hours. However, your waiting for targets to hit shouldn’t decide the time frame you trade on. As per our in-house trading geniuses, 5 minutes and 15 minutes time frame is considered best for trading intraday.
We choose a five-minute time frame because it is a concise summary of what’s happening during the day and what has happened in the immediate past. With less volatile stocks or low beta stocks, you can also go within the fifteen-minute time frame.
The Best Time Frame For Swing Trading
Positional or swing trading is another popular mode of trading. Keeping all conditions constant, the risk in swing trading is on the lower side compared to intraday trading, which is why the time frame is also different.
Also, swing trading could be defined into two broad categories: STBT/BTST and Conventional Swing trading.
- STBT/BTST Trading & Time Frame
Sell Today, Buy Tomorrow (STBT) or Buy Today Sell Tomorrow (BTST), as the name suggests, is a trading style where you buy or sell a security a day before and then square off the transaction the next day.
For these types of trades, we can’t look at weekly candles or day candles to gauge the momentum of the trade. Why? Because by the time we would hit our target, many other BTST or STBT trade opportunities would pass by. So the best time frame for this kind of trading is either 30 minutes or 1 hour.
- Swing Trading & Time Frame
If you want to span out a trade for more than two days, say for about a week or even for a month, you need to trade on the daily candle time frame. And definitely, when we go for a higher time frame, we will get a clear picture of possibilities that the price can go. But you should have sound knowledge in finding out the key support and resistance levels.
So, now you are all ready to become the best trader in your circle. Why? Because you have the power of the right time frame to boost your trading.
Although choosing the right time frame helps a lot, you also need to master price action to make lucrative trades. Want to learn the essence of price action and choose the best time frame to make your trading lucrative?
Join Trading Cafe India to venture into the most profound secrets of trading in the market.