Time Perspectives in Trading

November 20, 2009

Whether or not you're using astrology in your trading plan, it's important to time your trades correctly-and to maintain the right time perspectives.

This need for the proper time perspective comes from our general inability to see the forest for the trees. We get so close to small-scale fluctuations in action that we fail to comprehend the larger-scale trends.

In the markets, this usually means that we make the mistake of focusing only on the time frame we are trading, while we fail to see what's happening in other time frames as well.

For example, if we are trading intraday, we let ourselves get hypnotized by the one-minute price bars on our screen, while forgetting to look at what's happening with the 30-minute bars. If we are swing trading we focus on the daily bars alone, while overlooking the action on the weekly and monthly charts.

If you've ever let that happen to you, I know you understand what a problem it can be, especially if you've taken action in the markets based only on the perspective of the shorter time frame.

There were certainly times in my own early experience as a trader when I made that mistake. In each case, I miraculously managed to walk away from the market strong enough to return on another trading day, but even so, each of those adventures left me with a bloody nose and an aching wallet.

So do yourself a favor. Whenever you trade, be sure to take several time frames into account.

Identify the support and resistance zones and the prevailing price trends on the monthly chart and the weekly chart before you turn to the daily chart to look for trading opportunities. Or, if you're using software like the Fibonacci Trader/Galactic Trader platform, use the "Encapsulization" feature to help you view multiple time frames simultaneously on one trading chart.

Either way, you're likely to come up with a perspective that can lead to bigger trading profits. But even more importantly, it's a perspective that can also protect you against bigger trading losses!

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