Topic: Longer timeframes? Why?

Why use longer timeframes in FSB and FST?

When you look on charts from all time frames they look the same.
If you would remove all time descriptions, you would not know which is which.

Let's say you test 3000 bars.
3000 bars in 5 minutes timeframe is roughly 2 weeks.
3000 bars in 1 day timeframe is about 10 years.

You can get strategy giving you 50-60 % profit in both cases.
Why wait 10 years if you can wait 2 weeks?

Re: Longer timeframes? Why?

In general signals from longer timeframes are more reliable.
At shorter time frames you can make more money at a higher risk.

Re: Longer timeframes? Why?

hans753 wrote:

In general signals from longer timeframes are more reliable.
At shorter time frames you can make more money at a higher risk.

Do you or anyone have any hard proof of this?

Re: Longer timeframes? Why?

The stock prices are based on the Random Walk Hypothesis http://en.wikipedia.org/wiki/Random_walk_hypothesis
And I  read that this applies more to the smaller time frames. No, I don't have anything to proof it.

But if you trade during the news, you can get a 100 pips move within seconds. These moves are huge for a 5 minute candle and for the indicators, whereas for a daily candle it is just a small move.

Re: Longer timeframes? Why?

Hi, i'm new to the software and forum but not to trading. I believe that most larger funds trade on shorter time frames for more trading opportunities. A couple of things to note are that they usually put on large positions that can move markets with smaller volume than the fx market such as equities and futures. Breaking a large block trade into smaller trades moves the market less for these funds/institutions and allows for more profit. To make a system fully complete, you must have your entries/exits and money management in place, but you should also know the expectancy of your strategy. Knowing if you make 50% annually or 50% in 10 years is a big difference and knowing the returns you will make in what amount of time makes your strategy even more 3 dimensional. Also, the longer one is in a position, the longer one has exposure to extraneous factors such as geopolitical risks, natural disasters, etc. so there is inherent risk in long term strategies that aren't as easily identified. The analogy of a news spike on a 15 minute chart compares with holding a position during the 2008 crisis, or the oil spikes of recent events, etc. etc., on the daily or weekly TF's. That being said I have a ton of work to do to find a system that adheres to my objectives, time horizon and risk tolerance...hopefully I can collaborate and get that accomplished in this forum. http://www.finalternatives.com/node/9271             
That's a good link on high-frequency trading and their role in the market.

Re: Longer timeframes? Why?

acharyadas wrote:
hans753 wrote:

In general signals from longer timeframes are more reliable.
At shorter time frames you can make more money at a higher risk.

Do you or anyone have any hard proof of this?

If you have been trading for a while, you will understand why signals on higher time frames are more effective..

Perhaps examine the same signals on each time frame and observe the distance traveled and you may see.

My 'secret' goal is to push EA Studio until I can net 3000 pips per day....

Re: Longer timeframes? Why?

http://s3.postimage.org/14eieitac/TF5_PR53301.jpg

http://s3.postimage.org/14eqo7jr8/TF5_PR153301.jpg

I see both sides. Proof is in TS PR net of 3 time frames. 15 min, 5 min and less. You may see that the same strategy nets more in the smallest time frame. Hope this helps.

8 (edited by DAV 2011-03-30 19:17:21)

Re: Longer timeframes? Why?

2 above are 15 and 5 and this is a smallest time frame. 317.55% is 5 min net, 80.68% is 15 min net and 1926.32% AROR net is the smallest time frame with same strategy. Hope this helps.

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Re: Longer timeframes? Why?

I am somewhat new to trading but one thing that I know is that short term charts and long term charts are very different. When using EMA and SMA they can signal different things as well as BB.

I trade longer time frames because it is easier to see patterns develop and it keeps my trade count down. Also, I don't have the time to sit and watch the charts all day. In the end the charts on different time frames are different. One must decide whether they want to be a short term trader or long term and stick with those time frames.

Daily Time Frame http://www.intellitraders.com/sites/default/files/imagecache/node_chart_size/charts/2024/1012.gif this is completely different than a 1 hour chart.

Re: Longer timeframes? Why?

acharyadas wrote:

Why use longer timeframes in FSB and FST?

When you look on charts from all time frames they look the same.
If you would remove all time descriptions, you would not know which is which.

Let's say you test 3000 bars.
3000 bars in 5 minutes timeframe is roughly 2 weeks.
3000 bars in 1 day timeframe is about 10 years.

You can get strategy giving you 50-60 % profit in both cases.
Why wait 10 years if you can wait 2 weeks?

I have been wondering this myself. If you look at Mr. Popovs fractal strategy it works great on a daily time frame but I am unable to get such reliable results on a 1 hour or lower time frame. If you can get a working strategy on a lower time frame then I agree, forget about daily or 4 hourly.

Re: Longer timeframes? Why?

There is one simple reason to use longer time frame instead shorter: longer time frame provides more time for the price to move and this gives greater chance to compensate the spread.

Re: Longer timeframes? Why?

100% Agree mr. popov.. in my experience / view.. Daily (long) timeframe have some significant advantage:

- 1 Candle in daily chart consist of more big price action than 1 candle in hourly chart.. so by trading in longer timeframe u can compensate the spread more by focusing on the "big picture" there..

- Forex spread so inconsistent from time-to-time (especially considering the news time/ new chart formation/ different trading time between london, US, & Asia) , 100% different than the LOGIC behind backtest when u put Fixed amount of spread as a based P/L calculation.. Supposed on "paper" or backtest in 5 min timeframe show 300% annual return, but some thing that u don't consider is the technical difficulty when the spread/liquidity getting worse at some % time of the candle.. I bet my neck that the outcome will be different in real life trading (maybe ur SL get slippage / ur TP didn't get executed / ur buy stop order get slippage / etc)

- IF u consider big player (Hedge fund / Investment bank / Proprietary trading firm )  I've been reading a lot about them, we can't say for sure that most of them get longer timeframe or play as HFT trader.. depends on each firm strategy

- Focus on longer timeframe relaxing ur mental/emotional stress by a LOT, which is helpening trading condition especially because Psychology of trader is also important.. By focusing on longer time frame u get more time to relax, time to think n u can keep ur real office job done.. basically having 2 source of income in ur family..

- Longer timeframe have a more easier chart pattern to recognize..

- if the "Exact" data for spread available i'll sure that the longer timeframe get the spread same between new candle formation.. not the case in 5 minute chart..

that's just my view....

Re: Longer timeframes? Why?

I prefer longer time frames.

My 'secret' goal is to push EA Studio until I can net 3000 pips per day....

Re: Longer timeframes? Why?

Time frame selection can prove to be very important to the success of any strategy.

Often we want to be similar to the high frequency traders of Wall Street..... and have trades going every couple minutes.

There are many problems with trading the lower time frames, latency and broker server errors are two causes.... Keep in mind that the broker has to scramble to get the right position, if he can not find the right position for your trade he just increases the slippage.

The people trading the fast time frames are fodder for the sharks.

I have assembled some articles that people should read before deciding on working with a fast time frame. It may save you a lot of heartbreak.

http://www.theforexguy.com/forex-daily-time-frame-busting-myths/

http://www.myfxbook.com/community/experienced-traders/we-just-plain-scared-trade/298964,1

http://www.moneyshow.com/articles.asp?aid=currency-28082

http://www.forexcrunch.com/trade-responsibly-chapter-3-use-higher-time-frames/

One advantage of the higher time frames is the amount of data that you need. far less..... meaning. faster processing time.

It may be worthwhile for you to digest what is in these articles and then plan your approach to an automated system.


Have fun.!!

My 'secret' goal is to push EA Studio until I can net 3000 pips per day....

Re: Longer timeframes? Why?

DAV wrote:

http://s3.postimage.org/14eieitac/TF5_PR53301.jpg

http://s3.postimage.org/14eqo7jr8/TF5_PR153301.jpg

I see both sides. Proof is in TS PR net of 3 time frames. 15 min, 5 min and less. You may see that the same strategy nets more in the smallest time frame. Hope this helps.


Please share the walk forward for both of these......

A backtest result is actually nothing in the way of reliable....

My 'secret' goal is to push EA Studio until I can net 3000 pips per day....