Understanding time intervals or ‘time frames’ will help you execute trades more profitably, whether you are a short-term trader or a long-term investor. Simply put, time intervals enable you to specify precisely how you want to view the price movements on a chart. It’s like looking at an object through a magnifying glass with three different magnification levels so you can see everything, from the general shape of the object to its minute details.
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What are the time intervals?
A time interval is a chosen scale at which you view the market, represented as a candlestick (‘candle’ for short) that lasts for a specified amount of time. For example, the Huobi Global trading interface lets you choose a time interval of 1 minute, 15 minutes, 1 hour, 4 hours, 1 day, 1 week or 1 month.
If you choose a 1-minute interval, each candle will last for precisely 1 minute. After 1 minute has passed and the candle is painted, the next candle starts being painted automatically for the next minute.
Similarly, a 1-month time interval will complete 1 candle a month and start painting a new one immediately after the previous one has been painted. Therefore, if you want to know what has happened in the previous six months, you need to look at the previous one-month candles; the image below shows you what such a chart looks like.
You can think of the longer candles as a sum of the shorter candles, with the shorter ones being a part the longer ones. For example, the 5-minute candle consists of 5 1-minute candles. Likewise, a 1-week candle consists of 7 1-day candles. Therefore, the shorter the time interval chosen, the more specific the price movement becomes.
How do I choose the right time interval for my trading strategy?
The main thing you should determine is your preferred investment period. The longer you want to hold a token, the longer the time interval should be. This is because you should know how the price has moved in recent times to identify signals for the foreseeable future.
For example, if you’re an investor who aims to hold a token for at least 6 months, you should use longer time intervals, like weekly candles. Conversely, if you’re a day trader who buys and sells daily, you will benefit the most from the shortest intervals, such as hourly candles.
This way, you will get the appropriate data to help you find the supports, resistances, and overall trends for your specific situation. Also, it will keep you from concentrating on unnecessarily specific price data, i.e., ‘noise’.