DislikedHi all,
After considering one component of system development as outlined by Tharp, namely opportunity (the number of trades you get in a given period of time), the last week or so I've been trying new ways of trading--trading on very small TFs. I've been using a method outlined elsewhere here on FF where the traders use a 5 second chart, and there is a ton of action there--can be quite dangerous, but can also produce tons of opportunities.
As Tharp notes so well, a system which produces an average of, say, 3R return per trade (twice the initial risk, in other words), can not be assumed to outperform a system which produces an average return of only 0.5R. This can easily be the case if a day-trading or scalping system can produce, say, 10X more trades per a given time period. Over an average day, in this example, the day trading system with a 0.5R expectancy produces a 5R per day "expectunity" (Tharp's term), while the other hypothetical system only produces 3R, if it gives one trade per day on average. Moving on...
Well, I've been an advocate of longer TFs, as is the general approach here, and I still believe greatly in the validity of longer TFs--but I believe now more so than ever that one must trade what fits him or her best, and not just take a general rule and forcibly apply it to himself/herself. That's why I forced myself to revisit shorter timeframes.
The case against shorter TFs has always been that price action is less reliable--basically price will move in a more erratic fashion... at least, that's what I interpret as the main disadvantage to shorter TFs. But take a look at the attached 1 minute chart of EURJPY which spans the last couple of days. Now, if you didn't know any better, would you guess this to be a 1-min time frame, or might you believe at first glance that it was a well-behaved daily chart?
While IMO bar patterns like BUOB, pins, and so forth may not be as reliable, look how well price, overall, respects S/R and trends so nicely. This is just a small data sample, but this pair, and many others, behave just as nicely on a very regular basis on much smaller TFs as they do on larger ones. With so many opportunities, a disciplined trader with a fixed %R position sizing system could potentially do well.Ignored
From my experience, I don't think any timeframe is more reliable than the other but I do think that trading daily/weekly teaches you discipline and patience which is a vital tool to take over to trading smaller timeframes.
I traded daily for a long while and didn't have a great deal of success. Since I moved to hourly, things have been looking up. I have had eight winning weeks back to back with real money...although of course, having said that, this week is shaping up to be a loser...