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Charts Frames For Stock Using Technical Indicators

Fri Mar 19 2021 17:06
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Charting is the key element of trading. Without knowing much about charting you cannot succeed in any market. To be a successful trader you need to learn about types of charts, the importance of charting, reading charts, more. 

All these things are important, but more importantly, time frames for different charts are more important than any other task. Sometimes traders choose the right technical indicator and useful information. But they don't select the right chart frames for them. 

This single mistake can spoil your profits. However, using multiple charting frames can multiple your return on investment. But you need to consider charting more seriously. Here we are with the complete information about charting for you. 

Here in this post, we will discuss the charting techniques, types of charting and benefits of charting. So after reading this post you will be able to use charting with full potential and benefits.  

What Are Chart Frames? 

Chart frames are charts within a time frame. Here time plays a significant role. Because we have a look at the chart for a particular time frame. Time frames decide how much data for which period will be shown to you. Different time frames are used in charting. We can assume that adding a time frame to your stock charts will make it a chart frame. Where you will be having to look at the market data or asset data for a specific period. 

You as a trader can choose any time frame for your charts. Chart frames play an important role because they will impact the technical analysis. There are different methods to identify which time frame is better for your charts.  

Types of Chart Frames? 

Chart frames are of different types. As we have mentioned that chart frames have different time frames. So the time frame is the only thing that classifies chart frames in different sections. 

Understanding time frames or chart frames is very easy. But using different chart frames for your technical indicators is a little bit difficult.   

5 Minute Chart 

The 5-minute chart shows you market data or an asset’s data for a 5-minute time frame. So everything you will see on the chart is happening or happened within a five-minute chart frame. So rather than using long term market data, a trader gets market data for a short period.  

15 Minute Chart 

Sometimes even short term traders are not satisfied with 5-minute charts. That is why they look for 15-minute charts. 15-minute charts are considered three times wider than 5 minutes of charts. Most of the time experienced traders choose such a short time frame for their charts. 

Hourly Chart 

Hourly charts have many different subcategories. In the Hourly chart, you have an option to set from one hour to two or three. You can adjust the time frame as per your requirements. Technical indicators will get data from your hourly charts and it will be analyzed in technical analysis.  

4 Hour Chart 

In a 4 hour chart, you will be using a chart with 4 hours of market data. You will see 4-hour market data on your chart with complete market fluctuation. From swing traders to short term traders, many traders use this chart.  

Daily Chart 

The daily chart can also be known as a session chart or 8-hour chart. In the daily chart, you will see market data for a day. Most of the time, this day is the current market session. However, you can switch to the previous day chart also. 

Chart Construction 

Now you have a basic idea about chart frames. The next thing that you need to understand is chart construction. Charts are constructed with various elements. 

If you don't have any idea about chart elements and chart construction, then you cannot utilize these charts or read these charts. So here we are with the basic construction idea. Have a look at the following elements of charts and how they construct a complete chart. 

Lines 

Lines are used to constructing charts for various markets. They are useful when you are an experienced chart reader. These charts are known as line charts. 

Bars

Bars are quite easy to see and recommended to beginner traders. Bars represent market data with complete clarity. Bar charts are also being used by many traders. 

Candlesticks

The most advanced and useful charts are candlestick charts. If you know how to read candlesticks, then it will be so much helpful for you. 

Figures 

Figure charts use figures to represent data on charts. They are known as basic charts. But whenever you need a customized and clean chart, you can use it. 

Points 

Points are also an important part of charts. They are used to make point charts and sometimes they are used within some other charts.  

Technical Indicators 

Other than the data representatives, there are other factors like technical indicators on the charts. These indicators are MACD, Bollinger Bands, Stochastic Oscillators, etc.  

Trend Lines 

Trend lines are also helpful in charts and they are a major element in technical analysis. The trend is the key metric that traders want to capture. That is why trend lines are very important. 

Support & Resistance 

Support and resistance levels are also important to consider. Many technical indicators use support and resistance for their analysis.  

Importance Of Volume In Charting 

To read and use chart frames perfectly you need to understand volume in charting. Volume has a unique importance in charting. Without paying attention to volume, you cannot read the charts easily. Following are the major four types of volumes you will see in the market. 
  • High Volume In Up Days 
  • High Volume In Down Days 
  • Low Volume In Up Days 
  • Low Volume In Down Days 

What Time Frame To Choose? 

Now the question is which time frame is best for you as a trader. All of the traders out there need to know this because they want to get more out of the charting. Then what to do? Is a 5-minute charting frame good for you or not? It all depends upon the type of trader you are. 

Following are the major three types of traders. All of these traders have to choose chart frames according to their trading style.  

Short Term Trader 

A short term trader or intraday trader is recommended to use a 60-minute chart for the primary trend and a 5-minute chart for the short term trend. A 15-minute chart is the default chart for day traders. 

Swing Trader 

A swing trader is recommended to use weekly charts for better results. For short term trends, a swing trader can use a 60-minute chart frame. 

Long Term Trader 

Monthly charts are very useful for long term position traders. They can use monthly charts for primary trend and daily charts for short term trends.  

Summary 

Using chart frames is very important, but more important is to use these charts effectively. You need to choose the right chart frames for you. Choosing the wrong chart frame won't be helpful for you as a trader. 

First of all, you need to understand the elements of a chart. After that, you need to figure out how all of these elements make up a complete chart. Now after that, you have to choose a chart time frame according to your style of trading.  
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