Ask Colin

Should I be looking for the start and end of bull markets on daily, weekly or monthly charts?

The quick answer is that the peaks and troughs can be seen on daily, weekly or monthly charts. However, it is easy to lose perspective when looking at daily chars that only cover a few months. The useful check that I use is that if you cannot see the peaks and troughs that appear on the daily chart also on a four to five year weekly chart, they are probably in a shorter time frame than I use.

 

The particular pages referred to showed conceptual diagrams of trends. When I continued on with specific examples of market charts, I used daily line charts. These are better mostly that weekly line charts because they better capture the full extent of the peaks and troughs which could be missed on a weekly chart where the absolute peak or trough high or low occurred during the week. To see what I mean, compare a five-year daily line chart with a five-year weekly line chart.

 

A weekly bar chart, of course, is alright, because it captures exactly the lows and highs of the troughs and peaks. I used line charts because they simplify the picture and show what I needed to bring out of the particular discussion.

 

The key thing is that the daily line charts cover a few years in each case – enough to show the big picture. Try to have enough data on the daily line chart screen to show the whole of the trend, rather than just a part of it. You may need first to consult a chart with a few decades of data on it and then work down to the trend you are studying.

 

Note

One of the strongest methods is that of Dr Alexander Elder in The New Trading for a Living and Come into my Trading Room.

Keyword: