Ask Colin

Having become a convert to your use of trend lines to follow stocks, I have been tracking things on a DAILY basis - then I figured maybe this was too short a time interval? What is a reasonable time interval to look at trends?

Having become a convert to your use of trend lines to follow stocks, I have been tracking things on a DAILY basis - then I figured maybe this was
too short a time interval? What is a reasonable time interval to look at trends?

First, let me say that I do not use trend LINES to follow stocks. I use TRENDS which is the direct analysis of price. Trend lines is a terribly confusing term. Trend lines describe the rate of change of price in trends. At best they tell you if the trend is speeding up or slowing down, which while valuable information, does not tell you anything about the end of a trend. We explain this stuff in great detail in the subject E114 Technical Analysis at the Securities Institute of Australia.

Now, back to the question of time frame. It is essential that before you do anything you have an idea of the time horizon over which you are trading or investing. If you are a day trader (in and out inside a day), you need intra-day charts and daily/weekly charts. If you are a short term trader, you need daily and weekly charts and maybe intra-day charts. If you are a medium term trader you need monthly/weekly charts and maybe daily charts. If you are a long term investor you need monthly and weekly charts only.

It is actually quite a hazard to take decisions in one time frame and then track the trade in a shorter time frame. You will tend to always be thrown out of your trade too soon. There is more discussion of these issues on my free web site under Ask Colin.

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