Key Choices: Time Frame and Analysis Tools
The difference time frames make
First, longer time frames give you a chance to use all your tools to make accurate predictions. They also help filter out the noise on your charts — which we’re going to learn to read in the next module — and zero in on what’s really happening in your markets.
Short time frames, on the other hand, can make analysis difficult because they’re subject to randomized price movements that don’t really help you identify trends and trade on them profitably.
Second, longer time frames give you more time to think. This can be helpful if you’re new to trading and unable to make decisions quickly. It’s also convenient if trading isn’t your main job because it keeps you from having to rush to your trading platform for urgent decisions.
Having said that, short time frames have their advantages here too. If you’re an experienced trader, they help seize on opportunities others haven’t noticed yet. They also reward you for acting faster than others, helping you trade profitably if you can make fast decisions consistently.
Last but not least, long time frames change the psychological aspect of trading a great deal.
With long time frames, you can have a “set it and forget it” attitude where you open a position, set your stop losses, and come back to check in on what’s happening every day — or every few days or weeks.
Many traders find this to be a low-stress way to trade and enjoy it greatly. Others find it difficult to stay in positions for long without feeling stressed and worried.
Now that we’ve covered time frames, let’s move on to another key trading choice: analytical tools.
The most popular way to analyze market data is technical analysis. In technical analysis, tools are divided into 2 broad categories. These are patterns and indicators.
Indicators are mathematical calculations performed by computers. Depending on the specific indicator used, they can show you all kinds of information, from a coin’s volume for the last 5 minutes — predictions about prices extrapolated from fast data.
Indicators don’t put trading on autopilot, but they definitely help make accurate decisions that result in winning trades.
So do patterns. Unlike indicators, these aren’t calculations; they’re visual patterns that appear on coin price charts over and over again.
If you can accurately identify a pattern before it ends, you can predict which coins will rise and fall in value in the future. This can also help you make profitable trades consistently.
We cover patterns and indicators in detail in the next module. However, be aware that there are other analytical tools.
One is news and social media. which can point to market events or market sentiment, helping you predict future prices.
Now you understand the key choices you have to make as part of your basic trading strategy. Thank you for reading and see you soon!