A Comment On Intraday Charts

Discussion in 'Trading' started by OldTrader, Aug 12, 2003.

  1. To clarify, I don't use the daily chart per se for intraday trading. In fact, I have no chart on my monitor. I analyze the chart to determine 'points' that may be of interest IF the market happens to trade to that particular level.

    Some of those points might be things like:
    1. Yesterdays high and low.
    2. Major moving averages ie 10, 20, 50, 200 day averages.
    3. Swing highs and/or lows that are nearby
    4. Trendlines
    5. Direction of trend

    You get the idea. Any point of significance I have in my notes that I refer to.

    What I have on my monitor instead of an intraday or daily chart though are large numbers of sectors, key stocks, and things like tick, trin, A/D line, etc.

    There is little doubt though that the vast majority of intraday traders are using intraday charts in some manner. I am simply questioning the value of those charts. My belief is that these charts give the trader a sense of security, a way to feel that he has a means of setting a close stop, etc etc. My contention though is that the use of these charts chops out a decent portion of the day simply in recognition of the beginning and end of trends. I contend that the stock market moves based on what it's underlying components are doing, which later reflects in the chart. And if a move of importance is going to take place, it will reflect in the underlying key stocks and sectors, the trin and tick, and probably begin from an important spot on the daily chart.

    To watch the market in the manner I'm describing will require a thought process as opposed to a 'blackbox' theory. But let's face it....if one of your tactics is to buy pullbacks in a intraday uptrend, how difficult do you really believe that is without the benefit of the intraday chart? If you're using intraday charts to buy strength sell weakness, how hard is that to do without the chart?

    When you're seeing what appears to a 'major' breakout on a 5 minute chart, what it may really amount to on the daily chart is moving to a new high over yesterday!

    When the market comes down a number of days to the 960 level, an important swing level on the daily charts, do you need that intraday chart to understand we 'might' bounce from there?

    I read on here a periodically comments from people regarding how difficult the market is. Do you suppose that the reason that is has anything to do with the method used to trade it? Food for thought. When WMT gaps up, creating an underlying tone of strength in the market, there's a good chances that the market is not going to go down, regardless of what the 5 minute chart may say. If you're only looking at the 5 minute chart, you're going to be simply chasing the chart around with no understanding of what's happening underneathe the market. That technique has plenty of room to work when the days are 20+ points in range. It becomes more problematic though when the days are half that in range.

    AGain, food for thought. If whatever you're doing now is working like a charm, continue it. But you might pause to consider the idea that when everyone is doing one type of thing, it might be a good idea to at least question it.

    #31     Aug 13, 2003
  2. Miki


    The “problem” with your method, OldTrader, is that this board is populated with under-funded traders that cannot afford to trade larger waves in the market.

    The birds-eye view of the market requires somewhat larger purse.

    The 1 and 5 minute charts gives illusion of acceptable risks and false promise of dream fulfilment.
    #32     Aug 14, 2003
  3. I can't speak to what the level of funding might be in accounts here. One thing though, if the level of funding is too low, then the odds of failure increase fairly sharply because the leverage is too high.

    I generally would be in the camp that would counsel people to trade smaller. I'd rather make 10 points on one contract, than 2 points on 5 contracts, given the same size account. I'll use a wider stop. My personal opinion is that it's difficult to control risk in relation to a 2 point gain.

    I do agree with you that intraday charts create an illusion in terms of risk/reward. In the wrong hands, an intraday chart can easily lose the entire range through wrong buy/sell activity, when the underlying market may not have warranted all that activity.

    One of the statistics we see is that 90% of the traders fail. One of the reasons for that failure may well be funding. But certainly another reason may have to do with technique. And in that regard, I think traders should have their basic premises under a microscope as to their effectiveness.

    #33     Aug 14, 2003
  4. Miki


    Hear, hear... :)
    #34     Aug 14, 2003
  5. i second that!!!! hear .! hear!
    #35     Aug 14, 2003
  6. sprstpd


    So, the 15 minute chart will fulfill all my dreams?
    #36     Aug 14, 2003
  7. Agreed

    Much depends on the psychological traits of the trader... a successful scalper is only so because his personality allows him to be... however, any attempt to transition to a trend trading approach may result in failure...

    I agree with this profound and excellent point

    Well said...
    #37     Aug 14, 2003
  8. The 5-minute is great for entries and exits (been using it for years), however a longer term chart is essential to determine trend. I always ("almost always") trade in the direction of the 15 or 30 minute chart (using ema's and MACD).
    #38     Aug 14, 2003
  9. OT

    You are correct that many runs are not big point producers.... 3 to 4 pts. consistently and increasing contracts sounds wise to me...Capturing points is hard to do...increasing contracts is not that hard if you have the money.

    I have 2 strategies that look very interesting and have proven consistent for 2 1/2 years of backtesting with dead charts...But, they both work realtime also...SMA intraday system....

    I bombed out last year trading the Emini's due to ignorance and weak discipline trading the Emini Nasdaq...Knowing that the Emini S & P 500 was the better market to trade...Didn't lose much but commissions as I am prone to breakeven, just had to go to work and make a living...Most of the breakeven stops would move into the trade I was looking for....Nasdaq is too volatile..

    I've been fine-tuning 2 strategies that have proven accurate since I started keeping charts in 2001....One worked realtime twice today and both work on some days, if the market moves much at all.
    #39     Aug 16, 2003
  10. "There are alot of ships at the bottom of the sea son, and they all have charts"
    .......Captain Hazelwood, Exxon Valdez
    #40     Sep 8, 2003