Now that I had my focus on which instruments I wanted to trade, I needed to begin the process of looking at price charts. Day traders call them 'candlestick' charts because of the Japanese Candlesticks that are used to show price action.
At first it was fun, opening my charts, seeing the cool colors and playing with the demo trader, but soon I needed to begin searching for a way to use these charts to make a living. I did not have any experience with the charts and I did not know either to use a 1-minute chart or a daily chart, not to mention I actually did not even know what a tick chart was in the first pace. Through trial and error and a lot of reading I stumbled my way through the process of using my charts, and in the process I learned a lot about what works best.
One of the most effective strategies I learned in my experience was using multiple time frames to get a good view of the entire market. This simple strategy required me to utilize multiple charts that covered different time frames, such as daily, minute, tick, and range (my favorite). I then used those different charts to create a 'snapshot' of the market, and I use that to make educated trading decisions. The most important place to start is with your slow time frame, or as many day traders refer to as the 'anchor chart'. The anchor chart is the slow chart you have to watch. I like daily, weekly, hourly, and range charts, my favorite being a 34-range as my anchor.
The anchor chart shows you the big picture, the weekly highs and lows, massive head and shoulder reversals patterns, things that you simply will not see on a fast day trader's time frame. You need to know where you are in the big picture so you buy the highs or sell the lows of a larger trading range, and your anchor chart will help you achieve that. With your anchor chart showing you the big picture, now I need to use a chart to look for patterns. This chart should be much faster, and you will be using this chart to enter and exit trades. Some of my favorite faster time frame charts are 4-Range, 13-Range, 89-tick, 144-tick, 3-minute, 5-minute, and more. Notice that many of my choices of chart time frames use Fibonacci numbers as their root.
Keep in mind that there are millions of combinations for a slow and fast time frame chart technique. I've used everything from a daily chart and 10-minute chart all the way down to a 3-minute chart and 89-tick chart. There is never a 'wrong' combination, but there can certainly be the wrong way to use a certain chart combination. Each day trader has a different definition of success, so each case is treated differently. The charts you use will define the type of trader you are, and the amount of risk you will be taking, so this is a very personal decision to be made.
One key thing to remember is that the slower time frame you use, the fewer, but more 'potent' the support and resistance levels will be so you can expect more opportunity around them. On the flip side, if you use a fast time frame to trade with you will get many more opportunities each day, but each trade will be less effective. It can be difficult to choose the best chart time frame combination, so consider your goals and risk tolerance as a trader and you can conservatively earn profits with any combination you chose.