Ask Colin

Should I use daily or weekly charts to determine troughs and set stop-loss levels?

You have to decide what your time frame is. In other words what the trend is that you are trading.

If you were a day trader, you would be looking at something like five or ten minute bars and would look for peaks and trough on them.

If you were a short term trader, you might use the daily bars, because the day trader's trend would be within the rallies and corrections you were trading. You could use weekly charts, but there is a risk that your trend may be hard to see, because some of the peaks and troughs occur within a week.

If you are a medium term trader, you could use either daily or weekly charts. The peaks and troughs should be obvious on both charts. Also, each weekly trough will also be a daily trough, so it matters not which you use. However, the risk with daily charts is that you are tempted into taking signals on a shorter term trend than you are trying to trade. So, you should err towards the weekly charts. That said, however, sometimes you will need the daily chart to see the detail of the trend better.

The key principle is always to look at the monthly chart first, so you have the big picture. Then the weekly chart, then the daily chart. That way you keep a better perspective, than if you only look at the daily chart and with only a couple of weeks or months of data at that.