Traders often rely on indicators to make informed decisions. However, choosing the right time frame for these indicators is crucial. Many traders might use very short time frames, like one-minute bars, but this can be a mistake.
Indicators are built on the close of a bar. In very short bars, like one-minute bars, the closing price can change due to market noise. A tick up or down might alter the closing price but on such small bars, this change holds too much weight. This can mislead traders into making poor decisions.
On longer time frames, like 30-minute bars, a small tick up or down has less impact. The larger bars filter out market noise, offering clearer signals. This means the information you get from your indicators is more reliable.
Imagine trying to use a moving average on one-minute bars. The result would be a wavy line with lots of false signals. Now, apply the same moving average to a 30-minute bar. The line will be smoother and more stable, giving better insights.
Some traders might promote using complex indicators on one-minute bars, but this is not advisable. The noise in the market can create many false signals, leading to poor trading decisions.
A practical approach is to stick to longer time frames. For most indicators, a 30-minute bar is a good starting point. In some cases, a 15-minute bar might work, but anything shorter can be risky.
Using a longer time frame helps to clean up the noise. This way, the signals you get are clearer and more actionable. It reduces the chance of making trades based on false information, which can hurt your performance.
In summary, while it might seem tempting to use very short time frames, it often does more harm than good. Longer bars help filter out noise, making your indicators more reliable. This leads to better trading decisions and, ultimately, better results.
