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Day Traders Should Avoid These Timeframes

Adam Lienhard
Adam
Lienhard

When day trading, it is important to choose the right timeframe that suits your trading style and the asset you are trading. However, there are certain timeframes that you should avoid. Here are four timeframes you might want to consider avoiding.

1M (1-minute charts)

These charts provide the most detailed and timely data but also have a high level of noise and false signals. They are best suited for experienced intraday scalpers and high-frequency traders. Novice traders should use them with caution due to the high level of noise and the risk of whipsaws and misleading signals.

Longer timeframes (1D, 1W)

While longer timeframes can help define broader trends and avoid noise, they may not be suitable for day traders who need to monitor the market throughout each day. For instance, swing traders use hourly, daily, and weekly charts which help define broader trends and avoid noise, but they may not be suitable for day traders who need to monitor the market throughout each day.

Timeframes that don’t match your strategy

Your chosen timeframe should match your trading strategy and style. For example, momentum trading, which seeks to profit from short-term volatility, is typically performed on shorter timeframes like 5-minute or 15-minute charts. If you’re using a different strategy, such as scalping or swing trading, you might want to avoid these timeframes.

Timeframes that don’t match the asset’s volatility

The volatility of the asset you’re trading can also influence the best timeframe. For instance, highly volatile assets like cryptocurrencies may be best traded on shorter timeframes like 5-minute or 15-minute charts. On the other hand, less volatile markets may require higher timeframes.

What time periods to avoid when day trading? 

Not only a timeframe, but the whole time period may not be suitable for day trading. Here are a few periods that you may choose to avoid:

🌄 The opening minutes. The first few minutes after the market opens can be highly volatile as traders react to overnight news, economic data, or pre-market developments. Rapid price swings and a lack of stability during this period can make it challenging to execute trades with confidence.

🥗 Lunchtime hours. Around midday, typically between 12:00 pm and 2:00 pm (Western time), trading activity tends to slow down as traders take lunch breaks. This period often experiences lower liquidity and reduced price movement, making it less attractive for day trading strategies.

🌆 The closing minutes. The final minutes of the trading day, especially the last half hour, can exhibit increased volatility as traders rush to close positions and adjust portfolios before the market closes. Sudden price movements and heightened uncertainty during this time can make it difficult to manage trades effectively.

📰 Periods of major economic announcements. When significant economic data or news releases are scheduled, such as employment reports, interest rate decisions, or corporate earnings announcements, the market can experience heightened volatility. Many day traders prefer to avoid trading during these periods to mitigate the potential risks associated with unexpected market reactions.

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