About the reference timeframe in the market bottom/top chart ... [Foundations of the Bottom/Top Chart (4) - Total 8]
About the reference timeframe in the Ten-Right Bottom (ten-sei) chart
Even if the actual trading timeframe used for execution is separate, we should keep a chart timeframe open at all times
1-hour chart as the standard.
■ Reason 1 for using the 1-hour chart
First, please look at the following chart.
This is the USD/JPY 1-hour chart for June 2–6, 2017, spanning over the weekend, so
in a single swing trade over about two days, a profit of 173.42 pips was made.
Next, the chart for the same period on a 30-minute timeframe.
Compared to the 1-hour chart, there are more unnecessary signals (trades) in the middle, making it less efficient.
Furthermore, the shorter the timeframe (from 15 minutes to 5 minutes to 1 minute), the more signals increase proportionally, leading to more useless trades.
This means the number of signals increases, which is wasteful trading.
From the concept of the Ten-Right Bottom chart, which aims to capture the bottom and top, this is one of the reasons to use the 1-hour chart.
■ Reason 2 for using the 1-hour chart
There is a proverb, “You see the trees but not the forest.”
If the moves are small, there is no problem, but depending on the magnitude of uptrends and downtrends,
the movements of Stochastic oscillation (repeated moves from the upper band to the lower band, or from the lower band to the upper band) may not be fully covered by that time frame.
To illustrate, let us look at the top portion of the USD/JPY chart on June 2, 2017.
1hour
This is the state of pattern 2, where the previously mentioned bottom-targeting is approached with white near pink.
30minutes
The 30-minute chart also covers it, but after pattern 2 (the highest peak) the price continues to rise and becomes pattern 3 (the second peak) with pink near green.
15
minutes
With 15-minute charts, the rising wave is not fully coverable, and all lines cluster near the upper limit (glued to the top).
It becomes a shape that is difficult to judge.
Thus, when the market moves significantly, shorter timeframes cannot cover it, and within the whole picture (the forest),
the current price (the tree) position becomes unclear. Therefore, first keep track of the larger trend (1-hour chart)
and then examine the more detailed current movement (1–30 minutes) as a safety measure.
Depending on market size, even the 1-hour chart may not suffice, and you may need to use the 4-hour or daily chart
for larger trends, but as a general basis, the standard is the 1-hour chart.
Next time, to continue with [Foundations of the Ten-Right Bottom Chart⑤].
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┃★┃ Watching the “Ten-Right Bottom Chart MT4” in a video
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Where are the signals generated?
→ I tried trading using backtesting.
