Along with many other aids, we use candle charts to decide : 1. Wether to take a trade or not. 2. Based on which signals and in which direction. 3. At what price, risk, reward. 4. For what tentative holding period.
There are multiple ways of trading based on one’s own preferences of trading.
However, when we deploy charts, the following things happen:
- There are huge options of timeframes (candle durations) & you don’t understand where to start, which all timeframes to see, in which sequence
- What should be the lookback period as the charts get compressed or expanded easily many time. For, example for the same candle timeframe, I can have varieties of S&R lines which are not consistent with each other.
- In which sequence to see the various timeframes?
- What are the broad parameters of trading style, trading strategy, instrument, etc which decide how to select timeframes?
- How many timeframe to see?
- How to interprete the consonance and conflict of various signals from various timeframes?
- Would a choice of random or non-typical timeframes (but selected with you own analysis) lead to losses as market doesn’t follow that timeframe? For example, 4 minute candle in place of 5 minute candle?
- How does the expected holding time (like in intra-day, swing, options, positional, rolling futures, investment)
relate to timeframes analysed before entry? - What happens when one has no holding time in mind but only stop-loss and target prices.
- How does cost of idling of capital (not deployong it actively in trade) is affected by this?
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There must be a few fundamental concepts, observations and standard (easy) practices regarding this.