Trading Time Frames | Podcast Episode #132

0:07
Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex, everchanging world of finance. Learn what it means to trade profitably and consistently managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

0:25
You can succeed at the stock market and I’m ready to show you how. Hey everybody, this is Ryan Mallory with Swing Trading the Stock Market and I got a good episode for you guys. Today we’re going to talk about trading the time frames. Also going to do a little dabbling into the whole how does volume work with our individual trades?

0:44
Good e-mail from this one guy. I wanted to use his actually original name, but he signed it as a good redneck name. So I’m going to go with that, even though I kind of liked his original name better. It was like a solid, firm, good name. But I won’t go there. I’ll use the name that he requested.

1:01
The good name is going by Jethro. Now you may remember that in some previous episodes I have used Jethro before, but hey, people get what the people want and they want Jethro again. So Jethro gives us a pretty good e-mail here, he says. Ryan, my name is Jethro.

1:18
I’m a 29 year old commercial plumber out of New York. And by the way, commercial plumbers, they make bank, man. I know there’s like stereotypes of plumbers, you know, like in cartoons and and movies, like they’re always showing a butt crack or something like that. But no, those guys do good.

1:35
Those guys do good for themselves, man. I always think that, man, if you’re going to not go to college or if you’re going to try to develop your own trade, be a plumber, man, those guys coming to your house, they’re not leaving cheap. And that’s coming from a guy who went to college at the University of Central Florida to become a political science major.

1:54
And Can you imagine the things you can do with a political science major? It’s not much. I think it pretty much prepares you for a lifetime of paper pushing, and I couldn’t do the paper pushing and that’s why you have me here doing podcasts today and doing SharePoint or and doing stock market.

2:09
I was not cut out for the corporate world, I don’t think any case, he says. I discovered your podcast a couple weeks ago and I’ve been feverishly blowing through every episode. They’re amazing. No other podcast has been able to capture my attention like yours, whether it’s the whiskey or the stock advice.

2:24
It’s all topnotch. And what’s funny about that is that I get a lot of negative reviews about the fact that I talk about whiskey. I like whiskey, but then I also get even more people that like the whiskey aspect. You guys leave me torn, man. I don’t know. I don’t know, talk about the whiskey. Don’t talk about the whiskey.

2:39
You guys are killing me. But anyways, I’m gonna keep talking about the whiskey. He says. My question to you is maybe for a podcast episode is could you explain the time frames that you look at when scanning for your next trade? Yes, I will because I understand that your top down approach, but when you’re first scanning stocks each night, are you looking at the 15, the five day window to look at the recent trends and then looking at the day chart for the overall trend over an extended period of time?

3:05
Who am I kidding? I know you have day charts memorized by now. I do have the day charts memorized by now, but each day is different. So I have to keep reviewing these daytime charts, right? I mean, I I wouldn’t say I have them completely memorized. But if you ask me, hey, what is Alibaba doing right now?

3:20
I could probably sketch out that chart. You asked me, what is Caterpillar doing? I could, I could sketch out that chart. Not every single candle verbatim, but I could draw a line and show you what the charts are doing. I look at them every day. And that’s one of the cool things that as you get more and more engrossed in the stock market and as you become more familiar with these stocks that you’re trading, they’re going to become very intimate in your mind.

3:40
You’re going to be able to know exactly how they look. And I can usually look at a chart and tell you what stock it is. If it’s in the S&P 500, I can almost every time tell you what stock that is. So we’re going to tackle this part of the e-mail 1st and then we’re going to get into the volume question next.

3:56
But so just for you guys wondering what am I drinking while I do this podcast, I’m doing Angels Envy right now. It’s been on my shelf for a while. I haven’t really revisited much of late, but Angels Envy is pretty good. It’s a solid. It’s a little bit on the pricier side. I think for a bottle of it, you’re going to pay somewhere in the realm of like 90 to $100 for it.

4:15
But it’s Angels Envy finished rye. It’s a rye whiskey finished in Caribbean rum, casts 50% alcohol. It’s good, like when I’m rating this thing, I give it like an 8-9. It’s a good, good whiskey in my opinion. Often times when I go to the bar and I’m going out with friends or something like that and we’re grabbing drinks, I don’t really want to get a Old Fashioned or a Margarita or anything else because most of the time they don’t make very good ones.

4:38
But what I’ll often ask them is like, hey, do you got any Angels Envy? And they’ll say, hey, I got some Angels Envy and I’ll just order that and just sip on that for a while. So anyways, getting back to Jethro’s e-mail and about understanding my approach, what do I primarily work off of? It’s the daily charts in the trading block.

4:54
I provide the daily charts almost on everything. Do I look at the intraday charts? I absolutely do, especially when I’m in the trade itself, because I’m trying to get a feel for what is the stock going to do today, what is the technical analysis for the day at hand? But when I’m considering whether or not to get long, get short, or just forget about the stock altogether, I’m looking at the daily charts.

5:14
The daily chart is going to be a very, very strong chart. And so it’s worth mentioning this too, especially for the new traders out there, that with your charts, the more long term you get, the more dependable the pattern becomes. So for instance, if I’m looking at a one minute chart and you get a head and shoulders pattern on there, or you get a bull flag pattern on a one minute chart, it is not nearly as dependable as what you would get on a bull flag on like a daily chart or a weekly chart or a monthly chart.

5:47
The further out you go in terms of time frames, the more dependable the charts get. Now, the more long term you get with your time frames on your Japanese candlesticks, the longer it takes to develop, right? So on the daily chart, to get an entire candle, it takes a day, on a weekly chart it takes a week, and on a monthly chart it takes a month.

6:06
I know for some of you guys that’s like guy, Ryan, that’s a no brainer, but I try to appeal to everybody. I always want this to be an easy to understand podcast regardless of where you’re at in your trading path. So when you start going down into like the 5 minutes and the one minute charts, what becomes a problem is those patterns are not going to be as dependable.

6:26
You may get a head and shoulders pattern on a 5 minute chart and that pattern only lasts for 10 minutes. So unless you’re just like a pathological day trader that’s just constantly like scalping everything in sight, that’s really not going to do much for you. But you get an inverse head and shoulders pattern on a daily chart, and you might be looking at like a pattern that’s been developing over the course of a month or two months or three months.

6:50
You may be on to something big there. But if you get it on a tick chart, which is basically every freaking trade that’s made, which if you’re a completely deranged individual, you’re going off of the ticks. One minute chart is absolutely crazy in my opinion too.

7:06
Get off of the one minute charts. That will send you into like an emotional spasm if you’re trading off of the one minute charts. 5 minutes. I always have a 5 minute chart up. But if you look at my like chart layout and I can’t show it to you here on the podcast, so I’m just going to give it to you in like simple terms.

7:22
It’s kind of like 3 columns, right? Very small portion of the first column is my intraday charts and they’re split in half between the five minute and 30 minutes. Sometimes it’s the hourly chart. Big second column on my chart is the daily chart and that’s where I have like volume.

7:40
That’s where I have like stochastics and some other stuff, moving averages. That’s what I really care about. And then the third column is really my watch lists and portfolio and stuff like that. I care the most about the daily charts. The daily charts are going to be what most people focus on in terms of finding support and resistance, but it’s also worth getting into the weekly charts too when you’re looking at your trades.

8:03
It doesn’t have to be something that you have to go by wholeheartedly, OK? But I like to go take a sneak peek at the weekly chart because sometimes you can see a resistance level hanging over, like a multiyear resistance level hanging over a stock trade or a potential stock trade.

8:20
That if it gets near that, it’s going to be rejected by price more than likely. And it might not really be showing up on the daily chart because you’ve got to go years and years out. And if you’re looking at that on a daily chart, you’re probably not going to really have much of a daily chart to look at because all the candles are going to be like, smushed together. But on the weekly chart, it will show that to you in a much clearer form.

8:39
And if you can also go out onto like a monthly chart. I really don’t recommend going out any further than a monthly chart. There’s quarterly charts, there’s yearly charts. I really don’t recommend those. They’re not really going to show you much unless you just want to see what the stock market has done since beginning of its existence. But the monthly chart is as far as I would go out and that’s going to also show you some different resistance levels that you and support levels that you might not have known that was there.

9:01
But if you’re going to go narrow it down to two charts, I would probably say focus on the daily first and foremost and then focus on the weekly to make sure there’s no like hidden resistance levels you weren’t seeing on the daily chart. Now in terms of trying to time your entries and everything else, I use the daily for that as well a lot.

9:18
But I’ll also look at the hourly chart, the 30 minute chart to see if there’s a better entry that can be had as a result, especially if I’m struggling to find the ideal entry on the daily chart, I’ll start breaking it down into like an hourly or 30 minute chart to see if there is something much more clear cut there to take advantage of.

9:36
And if there’s not, then I’ll probably just pass on the trade. And so when it comes to like the market research that I provide, and I do a lot of this each and every day, I do it through swingtradingthestockmarket.com. It’s a Patreon account that I have set up to where I provide all my market research for basically anybody who wants it. If you want my analysis on the indices like the Russell, the S&P 500, the NASDAQ, you can get that.

9:56
If you want my analysis on the FAANG stocks like Facebook, Amazon, Apple, Netflix, Google, Microsoft, Tesla, you can get that as well. I update all of those each week and I also provide daily setups that I’m watching each and every day. Sometimes I’ll provide the charts that go with it. I’ll also give you guys my updated watch lists multiple times each and every week.

10:17
So there’s a lot that I provide there. But the one thing that I am usually always providing is the daily chart because I really feel like the pulse of the market is tied to the daily chart. So when you’re in trading, especially if you’re a new person when it comes to trading, first try to stay away from day trading.

10:35
Day trading is a skill that really comes with many, many years of experience, but so many people get wrapped up in the day trading. Stick with the swing trading at first because it’s better to do that and to really learn how to play the stock market rather than just going off of these spasms and the news events and the headline risk that comes with day trading.

10:53
And if you look at the overall market gains over like the last 20-30 years, the market’s large majority of gains have come from holding stocks overnight. The S&P 500, most of its gains have come from overnight trading. If you look at this year, the market’s up.

11:09
But where did the gains come from? It came from holding stocks overnight, not from day trading. Now let’s talk about volume. Jethro goes on to say also, this is a tangent, but what are your tips on using volume as an indicator? Lately I’ve almost been considering it to be synonymous to the market’s enthusiasm for a stock to go up or down or lack thereof.

11:31
If a candle is long with high volume, I assume the market is enthusiastic toward it moving that direction. If the candle is tight or virtually nonexistent with high volume, it tells me that there’s a lot of tension and uncertainty. If a candle is long with low volume, I feel like the price is moving, but not with a great enthusiasm.

11:49
Is this right? Thank you again for your time and energy that you put into this podcast. Thank you. And make sure you guys are reviewing this podcast. Personally, I don’t want to like beg or anything like this, but I do like those five star reviews. It really helps me to continue doing these podcasts. I mean, gosh, if everybody gave me one stars, I’d probably just go off the air.

12:06
There’s a few. There’s a few out there that I think probably would be happy about that, but build me up a little bit through these reviews, why don’t you? All right, so again, he says it’s amazing. Has fueled my interest in beginning my journey and trading stocks. So Jethro, he comes up with a lot of really good questions in this e-mail. I really like this e-mail.

12:21
It’s one of the best emails I’ve done. And because he just really gives. First of all, he tackles some stuff that I’ve not really discussed much about in terms of like the time frames. I don’t even know if I’ve in the 131 episodes I’ve done. I’ve really focused too much on the time frames. But we’ve pretty much pounded that one pretty good.

12:40
Now about the volume, volume is kind of a tricky thing. I would say like 20 years ago, volume meant a lot. But over time, volume has continued to get less and less in the stock market. So I mean, if you look at the volume, I mean the most volume that the S&P 500 ever saw was probably like around the 2007, 2008 time period.

12:58
And it’s kind of like sloped off over time since then. I mean, we saw probably a lot more above average volume here in 2020 than what we’ve seen over the last 8-9 years. But if you’re comparing it to like the volume levels of what we saw, let’s say like in 2003 and 2004, it’s a lot less than it was then.

13:16
Now that’s not to say that we’re not showing more volume than what we showed in like the 80s and the 90s—we are—but it’s definitely had this like little arch to it with the peak being about 2007, 2008. The reason why I bring all of this up is, is that volume is still important and I always look at what stocks are trading with heavy volume, but I want nothing more than to see my stocks running on strong volume.

13:37
But a lot of times that volume is coming as a result of a news event. So if you like, take earnings for instance, earnings is probably one of the biggest news events out there, right, in terms of volume and the volume that it generates. You’re going to always see big spikes on those particular days.

13:58
But if there’s no news on a particular stock, but it’s rallying, let’s say the sector is rallying and as a result that stock is rallying. Let’s say you’re like long on AMD or NVIDIA and it’s rallying really nicely. It’s breaking out to new all highs, but there’s no news really pushing it particularly. But the semiconductors as a whole is rallying. Maybe it’s because of a broader market headline that’s favorable towards semiconductors.

14:13
You may not see incredible volume in NVIDIA and AMD. So you may even see below average volume. And typically when the market rallies, it’s rallying on low volume. Now you look at like most of 2020, the market has rallied oftentimes, particularly in the summertime, it was, I mean if you look at the summer months, it was incredibly low volume.

14:32
Nonetheless, the market continued to rally, right. So you can’t discount the fact that price, price is always going to be the most important part, but volume is also important component too. I say there’s two important components to trading: it’s price and then it’s volume. Price is going to supersede volume, but volume gives you a clue to how enthusiastic people are.

14:49
If you’re seeing a lot of people pour into a stock after it’s sold off really hard and it’s putting in like a nice doji candle or a bottoming candle pattern there, that’s showing that OK, people are starting to buy the dip on the stock. Finally, it’s on above average volume. That’s good. But if this stock is like an ongoing rally and it’s just like rallying day after day after day, then you may see a lot of below average volume readings and that doesn’t necessarily mean that it’s a bad rally.

15:12
It’s just telling you that it’s rallying on low volume. Like I said SP500, SPY, it has rallied a lot on low volume this year. Now what’s good signs is when you get a breakout and you get a breakout on high volume, that’s always a very good sign. But sometimes that high volume comes with a big price swing.

15:28
So if you didn’t get in early, you’re going to find yourself chasing after it because of the fear of missing out—that whole FOMO thing. So to answer Jethro’s point here about volume, volume is important. But oftentimes volume readings like above average volume readings is going to be tied to specific events.

15:44
That’s a biotech, maybe it’s like FDA approval. The volume is going to be through the roof. Maybe the market’s rallying on above average volume, well, then most of your stocks are going to be rallying on above average volume. But if the stock market is rallying on below average volume, it’s a good chance that your stocks are going to be rallying on below average volume unless there’s a specific news event that’s causing it to rally.

16:02
Upgrades can cause it to have above average volume. Downgrades can cause it to have below average volume. So you really have to look at it in context and maybe I’m not answering the question the way or as clear cut as you might have wanted me to answer it, but it’s really the right way to look at it.

16:18
Look at volume in context. But I’m not saying that what Jethro is saying is wrong about the long candles and high volume. Yes, it’s good to see volume supporting your rallies, but don’t just sell a stock because it’s rallying on low volume because oftentimes in the midst of a rally that continues and continues and continues, you’re going to start seeing low volume come into play.

16:40
So to wrap up this show, time frames that I use—the daily. Also look at the weekly to see if there’s any hidden resistance levels that might not be popping up on the daily chart. If you’re struggling with defining where you want to get long or short on a trade or even where to place your stop loss, maybe look at the hourly chart, because sometimes you can also find some hidden support levels and resistance levels there as well.

17:01
When it comes to volume, volume’s good, but it doesn’t define a stock’s trade. You want good, strong volume in the direction that you’re trading. That’s always a huge plus. But don’t be surprised when you have a trade that’s rallying on low volume, because oftentimes that’s what the stock market does.

17:18
You like this episode? I encourage you to go to whatever platform you’re listening to me on, whether it’s Apple iTunes or whether it is on Spotify or Pandora. Pandora. I am now available on—so they just put my podcast on their platform. So if that’s a preferred platform for you, you can find me there.

17:36
But either way, I continue to appreciate so many of you guys. You’re really awesome. I really love you guys. I mean, there’s nothing more that I enjoy than doing this podcast, so I appreciate the love. I appreciate the comments. I read your comments. I read your reviews.

17:52
I read your emails. If I ever don’t respond to one or I don’t put it on the air, send it to me again, because I’m a fallible human being and there’s a good chance I might have just missed it. Okay. Send it to me again. You won’t offend me and I won’t, like, get irritated that you resent it to me.

18:12
So you guys, if you keep listening, keep supporting the podcast. I really appreciate it. If you have any questions or if you want me to answer one of your questions on my podcast, send me an e-mail at ryan@shareplanner.com and I will put it in my podcast folder and I will get to it, man.

18:30
All right guys, take care. God bless each and every one of you. Thanks for listening to my podcast Swing Trading the Stock Market. I’d like to encourage you to join me in the SharePlanner Trading Block where I navigate the stock market each day with traders from around the world. With your membership you will get a seven day trial and access to my trading room, including alerts via text, e-mail and WhatsApp.

18:51
So go ahead, sign up by going to shareplanner.com/tradingblock, that’s www.shareplanner.com/trading-block and follow me on SharePlanner’s Twitter, Instagram and Facebook where I provide unique market and trading information every day. If you have any questions, please feel free to e-mail me at ryan@shareplanner.com.

19:12
All the best to you and I look forward to trading with you soon.