Intraday Trading Strategy with Time Frames

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What Is The Best Price Action Trading Time Frame?

Every day, I get questions from people looking to trade better. A common question is what is the best time frame for price action trading.

Some of them are looking for a magical time frame that will bring them profits. Others are looking for a starting point to tinker with.

And it’s no wonder. A time frame is the first input you need when you open up a price chart. With infinite time frame choices, it can be difficult to choose.

First, understand that there is no magical time frame. There is no time frame that will work for you forever.

If you are looking for a magic number for your trading time frame, you can stop here.

But if you want to know how to:

  • Arrive at the trading time frame that works for you now
  • Know when you need to change your trading time frame

Then you are at the right place.

To find the best price action trading time frame, start by answering the questions below. (Be prepared to do some work.)

#1: How much can you risk? How much do you want to risk?

A price action trader typically enters the market based on a price pattern. And a stop-loss is placed on the opposite side of the pattern or setup bar.

Some price action traders enter with limit orders at areas of support and resistance. These traders tend to place their stop-loss orders at swing pivots. They might also use a volatility tool like the Chandelier Stop.

The key is that in both cases, generally, the larger the average bar range, the higher the trade risk.

The table below shows a random sampling of the 233-period average true range for different time frames in EURUSD.

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The conclusion is that higher time frames require the price action trader to risk more per trade. To trade the slower time frames, you need to be well-capitalized.

This is exactly why new and less capitalized traders gravitate towards fast time frames. This is acceptable if you can overcome the problems of fast time frames, which we will discuss later.

Another common workaround is to trade higher time frames with tight stop-losses. Unfortunately, this is not viable. Such stop-losses are illogical, and your trading setups will not make sense. (Unless you are using a faster time frame to refine your entry.)

Do This

  1. Figure out how much you can risk for each trade.
  2. Observe the market to learn how much you need to risk for different time frames, given your trading strategy.
  3. Stay with the time frame that requires an amount of trade risk that you can accept. If not, save up and increase your trading capital so that you can trade the slower time frames.

#2: How much time can you spend on trading?

The trading opportunities on time frames below 30-minute are fleeting. To trade effectively, you need to keep your eyes on the price action constantly.

For intraday time frames above 30-minute, you need be able to check on the price action periodically throughout the day.

If you can only spare a block of time each day, you should definitely consider trading off daily charts.

If you can only spare your weekends for analyzing the markets, then the weekly time frame is ideal.

In a nutshell, the time frame you can trade depends on how much time you can spend on trading.

Do This

  1. Review your current work and life routine.
  2. Assess how much time you can spend on trading.
  3. Use the guidelines above to help you to shortlist your time frame options.

#3: How fast can you analyze price action?

Even if you can afford the time to stare at the market all day, it does not mean that you should.

You might be able to look at the daily charts of the past six months and arrive at superb analysis. It might take you half an hour, but that’s alright, because you have time.

But if the price bars are forming at a rate of one per minute, can you still analyze price action effectively?

The faster the time frame, the less time you have to perform price action analysis. You need to be able to interpret price action confidently to do well with fast time frames.

Consider both your price action reading skill and your trading personality.

You might have the skill to analyze the market fast. But if you are not comfortable with split-second decisions, a fast trading time frame is not a good idea.

The reverse applies. You might enjoy the rapid action of fast time frames. But you cannot trade it unless you can analyse price action fast enough.

Want to find out if a trading time frame is compatible with your trading ability and personality?

Do This

You need to actually trade under each time frame and observe yourself.

  • If you are making mistakes with your analysis, then the time frame is too fast for you.
  • If you are missing trade setups due to indecision, move to a slower time frame.
  • If you are dozing off because the price action is too slow, drink some coffee. Or, if you are confident of your price action reading skill, drill down to a faster time frame.

Try out different time frames and keep observing your performance. This is the key to fine-tuning your trading time frame.

#4: What is the volatility and liquidity of your trading market?

The volatility of your trading market plays an important role.

A volatile market offers good profit potential for fast time frames.

However, a dull market might not move enough to offer reasonable profit in fast time frames. In that case, you need to increase your time frame.

As a general gauge of the profit potential, look at the ATR and the average length of price swings of the time frame.

The liquidity of your trading market matters too.

For instance, you want to trade stock options. But most stock options are not liquid enough for intraday trading. Hence, trading the daily time frame is a better idea.

Do This

If you want to trade fast intraday time frames, make sure that the market is volatile and liquid. If not, stick to trading daily charts.

#5: How do your setups look like?

Some traders claim that setups on the slower time frames are more reliable. And that there’s more noise in the fast time frames.

That’s not always true.

What is more important is that your trading strategy is compatible with your time frame.

Some methods work better on daily charts, while others do well in fast sub-minute time frames.

The acceptable time frames also depend on the type of setups and price patterns you trade. Clearly, the price patterns on a 30-second chart look different from those on a daily chart.

Do This

Ultimately, you need to evaluate your time frame in light of your trading strategy. Make sure that they are compatible.

Since you are the expert on how you trade, you are in the best position to judge compatibility.

In my trading course, I’ve explained a few concepts I use to select and monitor my trading time frame.

  • Price Action Trading Index – a measure of price bar normality
  • Minimum Trading Time Frame – the smallest time frame amenable to price action analysis
  • Optimal Trading Environment Index – a measure comparing volatility to trade risk

I won’t explain these concepts in detail as I’ve designed them for my trading framework. If you are not using the framework, they are of no use to you. You should be formulating your own system to decide on your trading time frame.

Finding a Price Action Trading Time Frame that Works for You

It’s clear that the optimal trading time frame depends on the individual trader.

Stop asking what is the best time frame for price action trading. Start learning how to find the best trading time frame.

By understanding the “how”, you will know when you need to change your time frame.

But once you have a workable time frame, it’s unlikely that you need regular and drastic changes. You need to maintain a fixed time frame to develop other aspects of your trading process.

Do not keep switching your trading time frame. It messes with your trading perspective.

Now, perform a thorough self-review with the questions above. Then, study the market that you want to trade. Finally, put them together and you will find the trading time frame that works best for you.

How To Use 1 & 4 hour Chart Time-Frames to Confirm Daily Chart Signals

A common question beginning traders ask me is whether or not I use intraday or “lower time frame charts” and if so, how do I use them?

For the most part, the answer is yes, I do use intraday charts. However, (you knew there was going to be a however, right?) there is a time and place for everything, especially intraday charts. It’s important you understand when to use them and how to use them. This is something I go into much greater detail on in my advanced price action trading course, but for today’s lesson, I wanted to give you a brief overview of just how I incorporate intraday charts into my daily trading routine.

This tutorial will demonstrate several of the core ways I use intraday chart time frames to provide additional confirmation to daily chart signals as well as manage risk, manage position size and improve the risk reward of a trade.

My favorite intraday chart time frames to trade…

Typically, people who email me about the intraday time frames want to know if I ever trade solely off of these lower time frames. The answer is, yes, I sometimes do trade the 1-hour or 4-hour charts on their own without taking into account the daily or weekly time frame. However, 90% of the time I use the 1-hour and 4-hour charts to confirm the higher time frame signal, mainly the daily chart time frame.

In this way, the intraday charts work as an extra point of confluence to give weight to a trade and further confirm whether or not I want to enter it. The other big advantage of the intraday charts is that they can allow me to fine-tune my entry to achieve better risk management. More on these topics later.

  • The most important thing to remember is that I never go lower than the 1-hour chart because from my experience, any time frame under the 1-hour is just noise. As you go lower in time frame, there are increasing amounts of meaningless price bars that you have to sift through and this makes the story of the market cloudier and cloudier, until you reach a 1-minute chart where you are basically just trying to make sense of gibberish.
  • I only look at the 1-hour and 4-hour charts when I am looking at intraday time frames. The anchor chart that I base most of my trading decisions on is always the daily chart time frame.
  • For those who like to look at weekly charts, the concepts in this lesson could be applied there as well. You would essentially use the daily charts to confirm weekly signals and add confluence to them, as well as fine-tune your risk management. It should be noted, I rarely trade off weekly charts alone, but for the die-hard weekly-chart traders, keep this in mind when reading the rest of this tutorial.
  • Remember, it is NOT essential to trade the daily chart with confirmation from the intraday. It’s just something you might want to implement as you become more advanced and have mastered the basics of trading daily chart time frames.
  • Remember, this is NOT day trading! The length of time we are holding these trades is still intended to be a full overnight position or multiple days / weeks. Remember, the initial trade trigger is still the higher time frame chart.

Using Intraday Charts for Second Chance Trade Entries

Everyone hates missing out on a perfectly good trade, myself included. Luckily, there are a number of different ways you can get a good second chance trade entry on a signal you initially missed.

One of those ways is by use of the 1-hour or 4-hour charts to look for a signal a few hours or even days later, to re-enter in the direction of the original daily chart signal that you missed.

In the example below, we see a clear-as-day pin bar buy signal from support in the S&P500, circled in the chart below. If you missed this one, you were definitely kicking yourself…

However, for savvy price action traders, they know a second-chance entry will often present itself on the intraday charts not long after the daily signal fires off. Notice, in the chart below, we see a fakey pin bar combo pattern formed shortly after the daily pin bar. Also, notice there was a larger 4-hour pin bar that formed the same day as the daily signal, adding more confluence to that daily signal.

Using Intraday Charts to Confirm Daily Signals

Sometimes, you may see a potential daily chart signal but you don’t feel convinced. It may not “look right” to you and you feel it needs some more confirmation as a result. This is normal, and it happens often.

You will sometimes then get a 1-hour or 4-hour chart showing a super-convincing signal after the daily one you weren’t sure about.

Notice, in the chart below, we had a bullish tailed bar at support in an up-trending market. But at the time that bar formed, you would probably be wondering if it was really worth taking or not, due to its bearish close and the preceding swing lower.

Intraday chart to the rescue. Notice the two convincing 4-hour pin bars that formed around the time of the above daily chart bullish tailed bar. You could have used these 4-hour pins to further confirm your feeling about the daily chart signal you weren’t sure about.

Sometimes, you will see a daily chart signal forms but does not have any real obvious confluence with a strong trend or key chart level. In these cases, you can rely on a clean intraday signal to be the confluence that you need to either enter the trade or pass on it.

Notice in the daily S&P500 chart below, there was an intense sell off in early 2020. It would have been very tough for most traders to buy right after such a strong sell-off. There was a lot of bearish momentum and pressure overhead and this would have cast doubt on the daily chart pin bar signals seen below.

The 1-hour chart would have helped us in this situation. As seen below, back-to-back 1-hour chart pin bars formed at the time of the above daily signals, indicating further confluence and giving us further confirmation, it was safe to enter long. Also, entering on these 1-hour pin bars allowed a much tighter stop loss and thus better risk / reward profile as will be discussed in the next section.

Using Intraday Charts to Tweak Your Risk Reward and Position Size

As we know, the daily chart requires us to use wider stops most of the time (unless we use the 50% tweak entry as exception), so in most cases, when we use the 1 or 4-hour intraday chart, we can implement a tighter stop loss and adjust position size accordingly. This allows us to substantially improve our risk reward because the stop loss distance is reduced and the position size can be increased as a result, but the profit target remains the same.

This is not going to be the case on every trade on intraday charts, sometimes the risk management ends up being very similar to what it would have been on the daily chart on its own. But there are many instances where it works out to where you can double or triple the potential reward on a trade by utilizing intraday signals.

In the Dow Jones daily chart example below, we can see a clear pin bar signal formed and if you had entered near the pin high with the classic stop placement of the pin low, you’d likely get a 2R reward, POSSIBLY 2.5 or 3R at the most.

The 4-hour Dow Jones chart around this same time, fired off a 4-hour pin bar shortly after the daily pin above, providing us the potential to essential trade that pin bar instead, this reduces the stop loss by about half and allows us to double the position size, upping the reward to 6R max instead of 3R. Maximizing winning trades is essentially how you build a small account into a big one and how you make big money in the markets.

A similar situation in the example below. A nice GBPJPY bearish daily pin bar formed, albeit a pretty wide one. Your stop loss would have been over 300 pips from pin high to low on this one, greatly limiting the potential Risk Reward:

The 4-hour chart fired off a much smaller pin bar after the above daily pin. This allowed us to turn a 1R winner into a 5R or more potential.

Conclusion

The intraday tweaks and ‘tricks’ that I showed you in today’s lesson are just some of the ways I utilize the 1-hour and 4-hour charts with my three core price action trading strategies in my trading plan.

Price action trading does not simply consist of just looking for a few candle patterns on a chart and then placing a trade, not even close. There is a lot more involved. The process of actually finding and filtering trades, managing risk / reward and then executing the trade and managing it both technically and mentally, is something you can’t learn overnight. There is a technical analysis side and a mental side to every trade, and both parts have to be learned and practiced over and over before you truly gain the ability to make consistent money in the market.

After reading today’s lesson, I hope you have a better understanding of how to use the intraday charts properly, unlike most traders. Don’t make the mistake of using the intraday charts to micro-manage your position and over-trade. This is wrong and will cause you to lose money.

Instead, utilize the tips and tricks learned in this lesson and the others I teach in my trading course, to use the intraday charts to your advantage. Trading is about making the most out of a good signal, and this is what I use the intraday charts for, not to over-trade or meddle in my trades like most traders do. I hope you too can now use the intraday charts to your advantage by implementing the theory and concepts in this tutorial to ultimately improve the odds of any given trade working out in your favor and maximize its profit.

What did you think of this lesson? Please leave your comments & feedback below!

Intraday Trading Strategy: How to Trade the Opening Range

Intraday Trading Strategy: How to Trade the Opening Range

The opening range strategy is used by futures traders all over the world. It was made famous by pit traders who have transitioned to the screen.
The premise of the opening range strategy is finding a timeframe that suits your style of trading and getting long above the top of the opening range and getting short below the bottom of the opening range. Simple enough?

Markets open up for the US session every day at 9:30AM EST.

Most futures markets actually trade around the clock. However, you only want to watch and trade during the most active market hours. Find out what the best futures trading hours are and which to avoid here.

The intraday opening range is most commonly defined as any timeframe within the first 10-minutes of the US open.

At TRADEPRO Academy we stick to a 30-second opening range or a 5-minute opening range. If you hold positions longer, with larger stops and take profits, you can move the scale-up.

10-minutes, 15-minutes even 30-minutes.

Also, at 10 AM EST we have a lot of important economic news releases, which increases volatility and volume.

This means the intraday trading opening range is between 9:30 AM and 10:30AM EST. Any timeframe within.

If you hold trades long and are a swing trader, you can wait for the first hour to finish to make a move.

As a day trader, the initial 15 minutes to 30 minutes are often enough to sense the direction of the market.

Intraday Trading Strategy – How to Define the Opening Range

As a day trader, you want to look at the opening range as anything within the first 15 minutes. If you plan to be a day trader with a few hours holding period, you can look at the first 30 minutes.

Swing traders will definitely want to wait out the initial balance of volume. The initial balance ends 60 minutes into the US session at 10:30AM EST.

What you want to do is identify the high of the opening range and the low. This can be done simply on Sierra Chart.

There is a study on Sierra Chart called the “High/Low for Time Period-Extended”.

In which you set the start time to 9:30:00 and the end time, the end of your opening range, for our example we’ll use 5-minutes. So the end time is 9:34:59.

The trade is simple, once the price action breaks above the high of the opening range, get long. If price breaks below, get short.

You don’t want to do this as soon as it breaks, but you would start to qualify a trade based on your entry criteria. I rely very heavily on order flow and correlation. Read why market correlation is the best trading indicator.

There are some breakout traders that buy 1-tick above the opening range (buy stop) and sell 1-tick below the opening range (sell stop).

Be cautious with this strategy especially in low volatility markets, such as in the summer.

There is a risk of getting stopped out on the trade before the actual break, that is why those breakout traders use a very tight stop of 1-2 ticks.

the higher probability trade lies in the patience of the break and the pullback into the area.

Intraday Trading Strategy – How to Trade the Opening Range

Here is an example of the 5-minutes opening range in the SP500 futures:

  • this is a 5 minute chart, so we are looking for the prices after the first few candles (tick chart)
  • The 5M opening range high is 2,880.25
  • The 15M opening range low is 2,875.75
  • at 9:35 price broke above the opening range
  • Bullish trade was possible on retracement back to 5M high
  • Stop loss placement is when price returns back in the range, or at 2,878.75 in this example

In the opening range trade strategy, especially in volatile markets, you may not get the full pull back and rotations. You may have to be a little more agressive when it does present you will a pullback opportunity.

Notice in the example below we do get stagnation and a slight pullback in the third candle break, this requires traders to get in just before the retest of the opening range high.

As long as you envision where you stop is, somewhere within the opening range. Not just a tick, but a point even, then it is worth a shot.

Remember in the markets, nothing is a guarantee, you’re given the opportunity. Some opportunity is higher probability than others.

As we can see from the chart below, the trade provided you ample opportunity to make a profit on the upside:

  • Assuming you took the long at 2,880 and trailed your stop-loss order to 2,887.25
  • You would have still been in the position and trailing!
  • For one contract on ES, at 2887.25 that’s USD $362.25 AND STILL TRAILING!
  • The trade required only $400 margin to open

I bet you’re all riddled with questions, why that trailing stop? Why not take a profit?

The answer to both is simpler than you may think. Notice the slight pullback and peak that we experience at that level. At 2887.25, that is where price slightly dipped.

If we get below that level, that is a change in the bullish market structure. If we get below that again, you don’t want this long anymore.

At this point, you are looking for a better level for the long, or even switch to the short side.

On another note, why not take the profit?

If you have one lot, you should! If you have multiples on, the rest of the contract size can be trailed higher! Take as much as the market gives you.

On the break above the overnight high, the next trailing stop level is 2888.00, why? That’s where the next peak lower is, and so on.

Intraday Trading Strategy – How to Avoid Head-fakes in the Opening Range Strategy

The example above was a great one of the profit potential when it works.

However, the ES futures are very prone to head fakes and stop-loss runs in the early part of the session.

What you want to do is to make sure that when an opening range is breached, you still wait for a good opportunity to get into the trade.

Don’t rush the process.

Just because you have a trade idea, it doesn’t mean that it’s worth the risk.

Create your checklist, know your strategy, and be patient.

Your opportunity will come.

Most losses can be reduced and outright eliminated with just a little more patience and discipline.

That’s the secret to trading.

Let us know how you like this intraday trading strategy, and how you tweak it to fit your style.

Good luck and good trading.

If you want to join us for weekly live analysis, trade ideas and daily market updates – you should sign up for one of our TRADEPRO Subscriptions here.

The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.

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