Intraday Trading Strategies Beginners – Intraday Trading Time Frame Selection

– [Presenter] Welcome to
Intraday Trading Strategies for Beginners video series. In this series, we will be learning about intraday trading strategies and short-term trading in detail. In this part, I will be
covering up the foundations of intraday trading time frame selection. I will be telling you why
best intraday time frame is a myth and one should not chase this. I will also be telling you why
multiple time frame analysis is important and how you
should be combining time frames to plan and execute your trade better. I’ll also be introducing
you to top-down approach in time frame selection,
along with three step approach to selecting the right
intraday trading time frame. In the end, I will be
explaining you the concept of time frame alignment and
how to use this in trading. In case you have landed
directly on this video, do start with part one of Intraday Trading Strategies series. Link to all these videos is given in the description box below. So before we move forward
towards time frame selection and multiple time frame
analysis, it is important for you to understand how trend works across all time frames. First, what you see on the chart is we have a short-term
trend that is mostly in existence due to
scalpers, intraday traders, and short-term traders. Such trends that occur
on short-term time frame are very unreliable
and are weak in nature. Second trend cycle that you see is that of medium-term trend, where swing traders and
medium-term traders are present. Now these trends are more
reliable and much more stronger. Third trend cycle that you see here is the long-term trend cycle, where positional and
long-term traders are present. And these are the trends
that are most reliable and exceptionally strong. So in terms of all these trend cycles, short-term trend cycle is sort
of a ripple in the market, medium-term cycle is a wave,
and long-term cycle is a tide. Now most short-term traders
don’t intend aligning with medium-term and long-term trend, and I feel this is not the right approach. Always remember that long-term
and medium-term trend help make the short-term trend stronger. And therefore, as an intraday trader, you should be in a position
to judge the medium-term and long-term trend and
then align with the same. I hope this particular point is clear. Now I’ll just take up 30 seconds to explain why time frame
selection is relative and why one must be careful not
to over-analyze this aspect. Now too many traders get
caught up in identifying the best time frame for intraday trading. In my opinion, this is a myth. And at best, you should avoid this. Now best time frame depends
on how you execute trades in intraday trading. It also depends on preference with one’s own psychological profile. Don’t try and replicate anyone
else’s time frame preference. What I would suggest is find
your own time frame preference by understanding yourself better. Now for example, if
someone is trading based on a opening range breakout,
then he would prefer something like a 15-minute time frame. Whereas a market profile trader would prefer something like
a 30-minute time frame. Now if you’re a trend trader
or a mean reversion trader, you would actually be comfortable with something like a three-minute to five-minute time frame. Therefore, time frame
selection is relative and you will have to see what
you are comfortable with. Now if you generally see
three-minute, five-minute, 15-minute and 30-minute time
frame is the most popular when it comes to intraday trading. And I will strongly
encourage you to experiment with all these time frames
to see which suits you best. Now rather than single time frames, what most intraday traders don’t realize is the importance of
multiple time frame analysis and this is what I will
cover in this video. Through multiple time frame analysis, you increase your odds
of success by aligning with the higher time frame trend cycle and riding the short-term
trend til it lasts. Now let us now see how higher time frame and short time frame work together. So what I’ll be doing is
I’ll be presenting you with a framework for time frame analysis and this is what we will follow in the remainder of the series. Now it’s important to understand this time frame analysis structure, and hence, pay attention closely. Now lower time frame, you
would use for entry and exit, but it is the higher time frame that will guide you
towards trade planning. The higher time frame here
will be used to assess broad market direction
and will be used to assess risk in market in terms of volatility and market performance. Higher time frame will also be used to assess price and volume
trend and market sentiment. Lower time frame on the other hand, you will be using only
to enter and exit trades. Now I will come to explaining
this in detail once we get to individual intraday trading strategies, but start thinking in terms
of this time frame structure from now on. Now you have to understand
that price and volume trend is a result of confluence
between various time frames, and unless you understand the
inter-time frame relationship, your potential to gain maximum profit will always remain limited. Let me now explain on
price and volume charts, how higher time frame helps you to decide in which direction to trade. Again, take a snapshot of
this particular framework because going forward, we
will be using this framework in almost all of our videos. So let me first summarize what is multiple time frame analysis. And once you understand the
basic point behind this, then we will start moving into the depth. Now this chart that
you see in front of you is that of a 30-minute time frame. Price here was in a well-defined range and then it broke out of this range with a wide-range high-volume candle. Now this then sets out the
tone for the next few sessions with respect to price trend. Now this is something
we have seen repeatedly that high-volume, strong
candles are extremely important and one must pay attention
to these whenever they form. Now this is the same
chart that is represented on a five-minute time frame chart. This marking that you see
on the extreme left side is that of a wide-range
bullish candle being formed on a 30-minute chart. That is, these candles help
this candle being formed. I hope this particular point is clear. Now once price breaks out, it heads into a consolidation phase before breaking out here at range one. Now once price progresses on the up side, it again forms a range
that is marked here, and then it again has a
break out at range two. Now this cycle carries
on where price moves up, forms a range, and then again
breaks out of this range to move higher. This is visible at range three,
range four, and range five. Now don’t start to focus yet on how we take entry at all these points. This will seem complicated for now. However, once I start with
the strategies section, I will show you how
easily this can be done. Now with each range that you see, look at how volume activity shapes up. While in range, volume
completely dries out and it is only that
when break out happens, volumes begin to expand again. This is how it typically plays out and hence, keep this price
volume pattern in mind. Now wherever break out is
happening and volume is expanding, I have marked out these
regions on the chart. Now what you’re essentially doing here is that you are taking
directional reference of trend from higher time frame chart. In this particular case, we
took the directional bias from a 30-minute time frame
chart and then we are looking for entry and exit opportunity
on a lower time frame chart, that is a five minute time frame chart. Now this way, you are aligning with the higher time frame traders and the trend they are setting. And you are looking to
benefit as the price moves in the direction of trend. I hope this particular aspect is clear because this forms the basis
of what we are going to discuss in the remainder of the video. So you essentially need to
refer to higher time frame for two main reasons. Number one, to get the
direction of trend right. And number two, to remove random noise on shorter time frame charts. Now let me explain this with few examples that what I mean by random noise on shorter time frame charts. Now look at the chart in front of you. On the left side, you have three candles on a five-minute time frame. And on the right side, you
have all these three candles combined into one candle on
a 15-minute time frame chart. Now if you’re a student of price action, you would read the first candle
on left side as positive. It has a long tail and small
wick and closing is positive on the up side. You would, however, get
worried after seeing candle two and candle three. Now candle two has a longer
wick and a small body. This represents slowing
momentum and supply ahead. And candle three if you see closely, is similar to a gravestone
doji candlestick pattern, which signals end of trend
when it is confirmed. Now the reason you have to
refer to higher time frames is that when you combine
all these three candles and see it on a 15-minute
time frame chart, you get to see the strong
candle with long tail and very small wick. Now body of this candle
is strong, as well, and it represents total bullishness, that is total control by buyers. On five-minute, you do get
many patterns and random noise, which you’d need to confirm by looking at higher time frame chart. This way you will have a balanced approach in assessing demand and supply. And you won’t get biased as a result of one single time frame. I hope this particular
point is also clear. Now this chart that
you see in front of you essentially confirms the importance of inter-time frame analysis. On the left side, you see 12
candles of five-minute each. Now as session begins,
volume is relatively higher as price has moved lower. In fact, the first candle
is a high-volume candle and has a wide range, as well. Now, as price consolidated
and moved higher, volume was again not at all strong. If somebody would be looking
at a five-minute chart, one would think that the bias for price is still down as volumes have risen when price has moved lower. And when eventually price moved higher, that movement has come
on back of low volumes. Now if you look at a 60-minute chart, this is what you get. This is the candle as a result of movement of all these 12 candles on
a five-minute time frame. And in the end, if you look at
this 60-minute chart candle, you get a strong wide-range demand candle on back of huge volumes. Again, don’t go by the
scale of this candle. I have compressed this image so that it fits the slide better. So what appeared weak
on a five-minute chart appears to be really strong
on an hourly time frame chart. I hope you can see how
inter-time frame analysis in intraday trading is
so vital to truly see who remains in control. That is the buyers or sellers. In this particular chart,
while sellers were in control in the beginning of the session,
by the time the hour ended, things had completely reversed. Now this is what makes inter-time
frame analysis so vital in intraday trading
and short-term trading. Now let us see one more example
to understand this better. In this chart, as supply
candles have formed on each of these instances, price has moved lower on back of significant volumes. Now look at all these instances on chart where supply candle gets printed and look at the
corresponding volumes here. Now as price has moved up,
it is evident that volumes have been very less and in
fact, it is insignificant when you compare it with volumes when price was moving lower. Look at these two levels. Leaving aside these two volume bars, look at all the volume
bars that are formed. Average volume is clearly
lower than what you have seen when prices was moving lower. Now anyone looking at volumes would think that price remains in
firm grip of sellers. And the current rise in
the market that you’ve seen is on back of poor volumes. Now if you consolidate this
data into a single candle that I’ve shown on the right side, you get this strong candle with a tail that forms on back of huge volumes. Now look at the candle body
and look at the volumes. This is clearly a wide-range,
strong demand candle that appeared weak on a lower time frame, but you have taken it collectively, it appears on a higher time frame chart as a very strong demand candle. Now time frame selection
cannot be random and therefore, there has to be a systematic
approach on how you select short time frame, medium time
frame and long time frame. Now in the chart in front of you, you see weekly time
frame, daily time frame, hourly time frame, and
time frame of minutes. Now there are four weeks in a month, five days in a week, six
60-minute sessions in a day, and six 10-minute sessions in one hour. The reason I have divided
time frames this way is to give you a systematic method of choosing all three time frames right. Now the first step is to choose a medium-term
time frame first. Now hypothetically speaking,
if my medium-term time frame is a 60-minute chart, this
is how I will then go on and select my long-term time frame and my short-term time frame. Now 60-minute time frame as I said would be my medium-term time frame. Now to arrive at a higher time
frame or a lower time frame, make sure time frame division
is consistent and uniform. Now let me explain this particular aspect. Now we know that there
are six 60-minute sessions in a day. Now six is a common factor here that leads to a higher time frame. That is the daily time frame. Therefore, prefer using same factor of six to arrive at a lower time frame. That is, if I choose a
10-minute time frame, then this would fit the
factor of six perfectly as there are six 10-minute sessions that form one-hour time frame. I know this part will be confusing, therefore, watch this segment again. Let me give you one more example. Now if I sell at 30 minutes
as my medium-term time frame, there are 12 30-minute
sessions that complete a day. That is a longer-term time frame. So my lower time frame would
be two or three-minute chart as there are roughly 12 two
or three-minute sessions that make entire 30-minute session. So the common factor here is 12. Now factor value can be approximate but make sure it is
more or less consistent. So factor values that I typically use are four, five, and six. Now this segment would
have confused some of you. Don’t worry, just rewind. Go back three to four minutes
and watch this segment again. If you want, I will give
you some more examples that you can experiment with. Do let me know by leaving a comment below. And I will then reply back
with some of the combination, that is time frame combinations
you can experiment with. So this is the time
frame analysis framework that we will be following. Long-term time frame would
be used for trend reference. Medium-term time frame will be
used for trend confirmation. And short-term time frame will be used for trade entry and trade exit. Now the main advantage
of using this approach is to seek confirmation
across various time frames and then to trade in the
direction of long-term players. Again, this is a very underrated concept in intraday trading. So this is an example of
what we just discussed. So if 60-minute is my
long-term time frame, my medium-term time frame
would be 15 minutes. So factor used here is a four. That is four separate 15-minute sessions form one session of 60 minutes. Now execution of trades I will be doing on a five minute time frame. Factor here would be of three. That is three individual
five-minute sessions make one 15-minute session. So factors used here for
time frame framework design are four and three, which are
pretty close to one another and hence, would work
as a good combination for time frame selection. Now there are some traders who would prefer using three
time frame combinations. And whereas, there are some traders who would prefer only two
time frame combination. But as a rule of thumb, don’t use more than three time frames as that may complicate things for you. For those of you who
prefer less time frames, instead of using a combination
of three time frames, you can also use a combination
of two time frames. Let me explain this with
examples in next few slides where I’ll take up the benefits
of time frame alignment, which results into
momentum-driven price moves. So I’ll take you through
three different examples here very quickly. Two are combinations of
60-minute and 15-minute chart, wherein the 60-minute time frame is the medium-term time frame and the 15-minute is the
short-term time frame where you would take entry and exit. Third example that I’ll be discussing is that of a 15-minute
and five-minute chart, where in the 15-minute chart
is the medium-term time frame and the five-minute time frame
is used for entry and exit. So the first chart that
you see in front of you is a 60-minute time frame chart. After a series of small
candlestick bodies, you do get a wide-range supply
candle that sets the tone for the next few sessions. Now once you spot this, you need to move to 15-minute time frame to spot an entry for a
trade that you have to take. So this is the 15-minute time frame chart that we’ll be using for entry and exit. So the first four wide-range
candles that you see are the candles that have
formed the supply candle on the previous chart, that
is the 60-minute chart. Now I have posted this candle, as well, as a sub-chart for your reference. Now once these candles are
formed, you then get a series of small candlestick bodies
on 15-minute time frame chart that are not ideal for entry. Now why they are not ideal for entry? Because they are not
aligning with the trend and there is no wide-range
candle that we are seeing. Now moving forward, we do get
two wide-range demand candles like I’ve shown on the chart. Now, had you been looking
at this time frame alone, you would have assumed
that this particular bias has turned, and price
would be moving higher because of these two demand candles. However, since you have referred to the 60-minute time frame chart earlier, you note that these two
candles do not align with the higher time frame trend. Hence, you let them pass and
wait for a proper entry signal. Now one session later, you do get series of
wide-range supply candles that become your point of entry as price progresses lower for
three consecutive sessions. I hope this example of using
multiple time frame is clear. Now this chart that
you see in front of you is again of a 60-minute time frame. You get one demand candle here that sets the bias for market
for the next few sessions. What you need to do is move down now to a 15-minute time frame chart and seek an entry in this stock. Remember one thing. 60-minute here is the
medium-term time frame. Whereas, 15-minute is
the short-term time frame where you enter and exit a stock. So this is the 15-minute time frame chart. First four candles that you see here are the ones that have resulted in a wide-range demand
candles on a 60-minute chart. Now post this, we do
get two supply candles that are marked here,
which have to be ignored as they don’t align with
the 60-minute trend. Then you get a strong,
wide-range demand candle that becomes your entry candle because this perfectly aligns
with the 60-minute trend that has been set by this demand candle. So following an entry,
you again get a series of small candlestick bodies
and these two supply candles, which have to be ignored
because they do not align with the higher time frame trend. I hope this particular aspect is clear. So this example that you see here is a combination of 15-minute time frame and a five-minute time frame chart. Now 15-minute time frame chart here is used as a medium-term time frame and five-minute is used
as a short-term time frame for entry and exit. So bullish undertone was first set here by a hammer and later confirmed by a wide-range bullish candle. This also appears to be a
bullish engulfing pattern. Now once you spot this,
you then have to move down to a five-minute time
frame to seek an entry. Please remember, this is not
a intraday trading strategy that I’m discussing. I’m just explaining how
powerful this concept of time frame alignment is. So on the left side here,
you get three candles that form bullish engulfing on the 15-minute time frame
chart that we just saw. Suppose this, you get
series of entry points on five-minute time frame chart that help you ride the trend. All these wide-range
candles that you’re seeing, these are valid entry point. You also get these
wide-range supply candles, which you have to ignore
as they don’t align with the trend of higher time frame. I hope this particular aspect is clear. Now unless and until you
operate within a framework, making sense of price action
on smaller time frame charts will remain random. Do not forget this crucial
aspect of intraday trading. Now whenever you want to
trade on intraday basis, always consider two time frames at least. First would tell you about the trend bias and second would tell you when to enter and when to exit a trade. I will also urge you to watch this video and the previous video one more time. Both these videos actually put together and highlight the importance
of putting price action and time frame together. The more you watch, the
more you will learn. So kindly consider hitting the like button and sharing this video, as
well, if you liked the content. In case you have any doubt
about what I’ve shown you or you want some examples from me about time frame combinations, do leave a comment below and I will get back to
you as soon as possible. So thanks a lot for
watching this video, guys. Take care and be safe. – [Man] Click on the
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