timeframes and trends

In another post we mentioned how to choose a timeframe.

This post goes into how timeframes and trends build up on one another.

Everyone has heard of the snowball effect and how a small ball turn into a giant one as it rolls down hill.

Trading charts are basically just technical instruments to monitor and assess the progress of the building up of the snowball. OK, that may be oversimplifying it a bit. A snowball doesn't go backwards usually. Financial market prices do.


What is really happening on a trading chart is that trader or investor sentiment is being recorded. Every auctioned quote is picked up and registered for historical record keeping purposes. Charts are the technical traders life line. The also serve the fundamentalist who looks for the true market value of a financial instrument to be met eventually. However in todays volatile markets which is trader, not investor, driven, one wonders if true value is ever really a point worth shooting for. By the time the price gets there the true worth as changed.


Timeframes and trends are easy to understand.



You can follow this experience and see for yourself what we mean.



Start by looking at a five second trading chart and notice that very short trends develop. These trends are sometimes not even big enough to cover the vig or cost of covering a buy or sell order. Yet it is a trend or divergence from the mean.



If it is a true trend with momentum in a direction then the banker or group of investors or traders who is moving the market will eventually run out of supply on the 5 second chart and continue moving the market in the direction of the trend which will carry show on a 10 second chart until no supply is left and then the 30 second chart until no supply is left and then 1 minute, 5, 15, 30, hourly, daily.....



Timeframes and trends are a matter of supply and demand and subject to liquidity.