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8 Understanding Timeframes Through Example

This document discusses the importance of understanding different market timeframes, including scalper, day, short, intermediate, and long-term timeframes. It provides two examples to illustrate how intermediate-term traders identify important price levels and how breaks of those levels can trigger trends as different timeframes interact. The second example shows a short-term trend in the S&P developing after a tight balance was broken below a key price level. Understanding how timeframes coexist and influence each other is vital for properly assessing market risks and opportunities.

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Deniss Koroblev
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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
91 views

8 Understanding Timeframes Through Example

This document discusses the importance of understanding different market timeframes, including scalper, day, short, intermediate, and long-term timeframes. It provides two examples to illustrate how intermediate-term traders identify important price levels and how breaks of those levels can trigger trends as different timeframes interact. The second example shows a short-term trend in the S&P developing after a tight balance was broken below a key price level. Understanding how timeframes coexist and influence each other is vital for properly assessing market risks and opportunities.

Uploaded by

Deniss Koroblev
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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UNDERSTANDING TIMEFRAMES THROUGH EXAMPLES

Knowledge is little, to know the right context is much; to know the right spot is
everything.-Hugo von-Hofmanannsthal

You are much better equipped to assess market risks and opportunities when you
understand the way in which various timeframes coexist and interact; our heaviest client
base consists of day and short-term traders, it is these traders who, very often, suffer
the most when they lose sight of or never understood the significance of these
coexisting timeframes.

To illustrate the importance we place on timeframes let me repeat two examples from
our blog of Tuesday November 9th 2010. The first represents an intermediate-term
timeframe reference in the crack spread.

Our focus was on the intermediate-term reference shown above, which we labeled as a
go no/go level. The timeframes, which are briefly described in the glossary and fully in
Markets in Profile are; scalper, day, short, intermediate, and long.

Trends exist for the last four timeframes; the longer the timeframe the more initial
potential the trend has. Long-term traders/investors are responsible for breaking new
ground, starting trends, and upsetting the status quo; within long-term trends are very
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potent intermediate-term trends, while they don’t break new long-term ground they do
upset the status quo for day and short-term trends that exist within the longer-term
trends. The primary difference between short-term and intermediate-term traders is that
intermediate-term traders, often referred to as swing traders, operate from a longer
point of view. They typically operate from the top to the bottom of the intermediate term
range, which can be quite extensive in range and time duration often extending over
several months.

Before we continue let’s look at the market for the next two days following the blog post.
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The dynamics of the intermediate-term reference:

1. Markets are very visual with professional traders very much aware of the
intermediate-term reference; as you see we were able to construct an almost
straight line across several highs, which identified the reference.
2. Professional traders, recognize that this is the high risk level and will often sell
their long positions below the reference and reestablish the position once price is
accepted above the reference.
3. Other traders and professionals will place two types of stops around this
reference; shorts will place buy stops to exit short positions if price breaks
through to the upside. Additionally, other traders will have placed buy stops to
establish new positions if price trades through the referenced level. Both of these
stops can help rocket prices higher if they are elected.
4. Earlier we stated that the longer the timeframe, the greater the initial potential.
The longest timeframe trumps all shorter timeframe; once a level is pierced and
price finds acceptance the shorter timeframes will pile on so that multiple
timeframes are all in sync. As the trend begins to age the other timeframes will
begin to diverge; however, initially they act in unison forming a single auction.
Traders that are unaware of this process, very often, are either caught the wrong
way or can’t help themselves from fading the breakout; successful traders have
learned to go with the breakout trend.

Our final, learn by example, shows the beginning of a short-term S&P trend.
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Perspective-The numbers on the graphic correspond with the numbers listed below.

1. On 11-04-2010 the auction exceeded the prior high at 1216.20; this level now
becomes support.
2. Friday’s new intermediate-term high at 1224.30 on 11-05-2010.
3. Monday afternoon saw the market form a very tight balance; our blog
identified the balance as a go no/go level. Markets don’t maintain tight
balances for very long before they begin to explore outside of the balance.

Let’s review the market a few days later.


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We identify a short-term auction as at least 3 to 5 days in duration; the break below the
very tight balance trigger a short-term auction to the downside; the dynamics of a short-
term auction are more subdued as only day timeframe traders are likely to pile on.

In real-time trading the timeframes are far more difficult to distinguish than the neat
descriptions we provide might suggest. While we have identified them separately, all
timeframes coexist, intersect, and interact with one another in a constantly changing
tapestry. It is the study of this coexistence, intersection, and interact that will comprise
your real learning. In one way or another Mind over markets, Markets in Profile, and our
newest educational DVD, Field of Vision, are largely about timeframes. Learning about
and understanding timeframes is a lifetime of study.

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