04/24/2010 12:38 AM

 
Adam & Eve Tops
Anticipating  A Selloff
Andrews Pitch Fork
Bid-Ask
Bilateral Trade Setups
Bollinger Bands
Bottoms
Breakouts
Breakout Trading
Canslim
ClearAir
Comp. Relative Strength
Cup With Handle
Cutting Loses
Daily Range
Declines
Exit Strategies
Exploring Market Physics
Dow and Elliot Waves
False Breakouts and Whipsaws
Flags and Pennants
5 Fibonacci Tricks
Finding Stocks
Fun With Fibonacci
Gaps
Greed and Fear
Highs
Low Down On Bottoms
Market Timing
Head and Shoulders
Hell's Triangle
Momentum Cycles
Momentum Trading
Morning Gap Strategies
Moving Average Crossovers
Overbought/Oversold
Pattern Failure
Pitfalls Of Selling Short
Playing Failed Patterns
Point and Figure
Pull Back Day Trading
Risk/Reward
Reversals
Selling Declines
Stochastics
Scanning Tips
Stage Analysis
Surviving Bear Markets
The Big W
Tale Of The Tape
Tape Reading
Time Trading
The Gap Primer
Tops
Trailing Stops
Trading Execution Zone
Triangle Trading
Trend Waves
Trend Direction and Timing
Trends
The Profitable Trader
Uncharted Territory
Williams %R
Wedges and Volume
20 Golden Rules
20 Rules For Trade Execution
20 Rules To Stop Losing Money
5 Wave Decline
3-D Trade Execution
Voodoo Trading

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Time Trading

 

Sophisticated technical indicators evolve from simple data inputs of price and time. While most traders understand how price patterns reveal hidden opportunity, many fail to comprehend how time impacts both tactics and results. Lacking a skilled understanding of opportunity cost, they misinterpret signals and waste valuable resources. Or, trapped in common trend relativity errors, they prepare trades in one time frame but execute them in another.
 
Opportunity cost defines how the trader manipulates working capital. For example, this important concept reveals why cutting losses efficiently is so important for long term survival. By its nature, taking any stock position dictates that those funds will not be available for another trade. This becomes a critical issue on account drawdowns when individual trades can dictate success or failure for the aspirant.
 
All trends in the markets are time frame specific. For example, the existence of an uptrend in a daily chart says nothing about the trend in the monthly or intraday chart. This highlights the importance of correct time input in preparing technical indicators or reading chart patterns. When improperly time-tuned, technical analysis loses its effectiveness. Alternatively, resonant time readings will evoke startling accuracy with otherwise mediocre data input.
 

Time Summation of indicators falls into three general categories: .

- Moving averages of elements such as price or volume
- Relationships between the open, close, high and/or low of individual bars
- Repeating cycles of price or volume behavior

Time Period of indicators falls into three general categories:

- Short Term
- Intermediate Term
- Long Term

Individual units of time are best viewed as relative periods, as opposed to daily, weekly or monthly lengths. Since no two technicians trade in exactly the same time frame, patterns and indicators must serve a broad range of uses. Fortunately, technical analysis studies a fractal market. Valid predictions may be made with indicators developed from 5-min bars or monthly ones in exactly the same manner. But don't be fooled: prediction can only be made in the same time frame as the tools being used to study it.

 

Trend Relativity: Trends are dependent on the time frame in which you are viewing them. While IBM shows a promising reversal taking place on the intraday, the daily and weekly show a major correction in progress. Notice how the weekly reveals an excellent buy point at the top of the multiyear price channel, a support level completely missed on the daily chart.