Simply put, larger time frames have a greater amount of participants, leaving a security less susceptible to manipulation. Staring at a 1 minute chart makes stocks moving in a 20 cent consolidation appear to be crashing up and down dramatically. There are a lot of fake out signals on smaller time frames that you cannot put too much weight into.
When you are looking at a 5 minute chart or even less -- each tick is representing a somewhat dramatic change in the stock price. In these time frames, professionals & High Frequency Traders (HFTs/Algos/robots) truly excel. Professionals relate to the scalper who make their living risking 5 cents to make 15 on 1 or 2 minute charts --- and started finding grey hairs their third day on the job. HFTs relate to the recent popular algorithmic trading craze that is sweeping the market.
So this brings me back to the question, “Are the days for day traders numbered?” YES, they are, because of these HFTs dictating the market. THAT BEING SAID, buying and holding patterns on a larger time frame will never go away as these patterns are tried and true & have survived everything the market has thrown their way. What I’m trying to say is that Swing Trading will never die.
The larger the time frame, the more participants and the more significant the support and resistance levels. What our GOAL in our strategy aims to do is find INTRADAY entries on 15-30 minute-hourly time frames, that will affect the stock’s DAILY or WEEKLY Chart. For example, When we see an hourly flag under a weekly level --- we want to load the boat long.
The best breakouts always occur after a pattern is drawn out really well on a weekly or monthly time frame. Let’s go over a few examples:
WYNN was working on a huge macro base for about a YEAR. Traders were staring at this for months and months before it finally broke out of the consolidation.
Similar to WYNN, CMG recently broke out of a huge basing pattern. It worked on this base for about eight months before it broke out over $60 nearly straight up over the next three weeks.
SHOP flagged at new highs for a period of about 4 months before the stock nearly doubled in the next 4 months.
The takeaways are that larger time frames have greater significance than smaller ones. If you focus on very small time frames you will mistakenly see signals and get faked out by the HFTs. These algorithms know exactly where day trader’s ‘stops’ are and so easily manipulate them. Day trading is for the birds --- the real money is made over the years by swing trading.
Whenever I do my annual review in trading, I find that about 75% of my annual P&L comes from about 4-8 monster winners from the year. The day trades & quick trades are appealing when you’re sitting in front of that computer all day, but know where the real money is made. Swing Trading.
Do you have balls?
Let's try this again, you recently just found a macro bullish pattern, let's now do it again, however now we are going to make it a bit harder. The level of resistance has to be setting up for a minimum of 2 plus years. NKTR through $25 on $1 risk that went 400% in 7 months set up for over a decade. Let's see if you can zoom out and find something feasty. Include a complete game plan and at least 4 layers of probability in your favor.
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