Discover more from Murphycharts
Tune Out The Noise
Daily, weekly or monthly? Some thoughts on timeframes when analyzing price charts.
Over the years, I’ve joked with colleagues and friends that if I were to rid daily candlesticks completely from my process, my portfolio would greatly benefit. Although this was said jokingly, I continue to come back to the idea and often consider implementing the rule into my process. Ask any price focused investor, daily charts carry A LOT of noise. By focusing primarily on weekly and monthly charts, we’re able to smooth out price swings that have no meaningful impact on primary trend direction. Just take a look below at the two charts of Apple Inc.
In 2016, the daily chart gave investors a plethora of reasons to sell the stock and/or have a bearish near-term outlook (as if anyone knows where stocks are going in the short-term). For investors who claim daily charts assist with entry/exit points - I say, “eh kinda.” In my opinion there is nothing that can be performed on a daily chart that cannot also be performed on a weekly or monthly. Stop loss included. I’d argue using weekly candles involving Average True Range (ATR) is a much better recipe for stop loss than using daily charts with the same ATR formula.
When it comes to monthly charts, the reduction in noise is beneficial to long-term investors. Weed out the noise, focus on trend and your portfolio will thank you. Disagree? Let me know!
That’s enough outta me.