3.08. Time interval analysis (1m, 5m, 1H, 1D, 1W)

Goal: Understanding the importance of different time intervals and their application in technical analysis.

Time intervals

• 1 minute (1m): Used for very short-term analysis, useful for daytraders and scalpers. Interval responds to immediate market changes, but can be susceptible to noise.

• 5 minutes (5m): Short-term interval, but less prone to noise than one-minute interval. Popular among day traders.

• 1 hour (1H): Medium-term time interval, balance between detail and amount of noise. Used for short-term strategies.

• 1 day (1D): Long-term interval, used by swing traders and long-term investors. Less prone to noise, better at identifying key trends.

• 1 week (1W): A very long-term interval, used by long-term traders and holders to analyze key market trends.

 

Practical use

• Day trading: Analyzing 1m and 5m charts allows you to react quickly to price changes. It requires great attention and quick decision-making.

• Swing trading: 1H and 1D charts are used to identify short-term trends and entry/exit points.

• Long term investments: The 1D and 1W charts help identify key trends and long-term turning points.

 

An example of interval analysis on the example of Bitcoin (BTC)

To give you a better understanding on how different time intervals can affect your trading strategy, we will analyze the Bitcoin (BTC) cryptocurrency on several different intervals: 1 minute (1m), 1 hour (1H), 1 day (1D) and 1 week (1W).

 

1 minute interval (1m)

 

Description: The 1-minute chart shows price changes over very short periods, each bar or candle representing one minute.

Analysis:

• Rapid price changes: On the 1-minute chart, we can observe dynamic price changes that are the result of fast trading.

• Scalping: This interval is ideal for scalping strategies, which involve taking advantage of small price movements to make a quick profit.

• Example: If you notice a series of green candles with long lower shadows on the 1m chart, it may suggest that buyers are taking control, which gives a signal for short-term buying. However, due to high volatility, stop-loss (SL) protective orders should be set.

 

1 hour interval (1H)

 

Description: The 1-hour chart shows price movements in hourly periods, which can give a better picture of medium-term trends.

Analysis:

• Candlestick patterns: On this interval it is easier to see candlestick pattern that may indicate a reversal or continuation of a trend.

• Short-term trends: Short-term trends: 1H analysis identifies short-term trends, which can last from a few hours up to a few days.

• Przykład: If a Head and Shoulders pattern is spotted on the 1H chart it may suggest a potential reversal of the uptrend into a downtrend. In such a situation, traders may consider closing the current long position and/or opening a short position.

 

1 day interval (1D)

 

Description: The daily chart shows price changes over daily periods, where each bar or candle represents one full day (24h).

Analysis:

• Main trends: The 1D chart is perfect for identifying major market trends that can last for weeks or months.

• Corrections and patterns:  on the daily chart we can see the main price patterns, such as flags, triangles or double-bottom patterns.

• Example: If bitcoin shows a major uptrend with several corrections on the 1D chart, this can be interpreted as a healthy bull market. Traders can look for entry points during corrections to join the uptrend at lower prices.

 

1 week interval (1W)

 

Description: The weekly chart shows price changes on a weekly basis, allowing analysis of long-term trends. 

Analysis:

• Long-term trends: The 1W interval is used to identify key, long-term trends that may last for months or years.

• Macroeconomic outlook: Analysis of this interval allows consideration of larger market cycles and macroeconomic factors.

• Example: If we see a long-term uptrend with several major corrections on the 1W chart, we can interpret this as a strong bull market. Long-term investors can use these corrections as an opportunity to increase their positions.

 

Integrated Time Frame Analysis

Integrated analysis of time frame intervals in the financial market involves analyzing market data across various time frames to obtain a more comprehensive picture of market trends and patterns. Here are the key aspects of this method:

Scalping on a 1 week interval

• Observation:  On a 1m chart, bitcoin shows rapid price changes, which is ideal for scalping strategies.

• Strategy: Using indicators such as moving averages (MAs) and Bollinger bands, traders can identify short-term entry and exit points. To manage the risk accordingly, set stop-loss orders.
   

Short-term trends on the 1H chart

• Observation: On the 1H chart, candlestick patterns may indicate a reversal of the short-term trend

• Strategia: Traders can use formations such as "Head and Shoulders" or "Double Bottom" to open positions in line with the expected direction of price movement. It is important to monitor indicators such as RSI (Relative Strength Index) or MACD (Moving Average Convergence Divergence) to validate these signals and isolate market noise.
   

Major trends on the 1D chart

• Observation: The 1D chart identifies major uptrends with several corrections.

• Strategy: Traders can use these corrections as entry points for long-term positions. Support and resistance analysis, candlestick patterns and trading volume can provide additional clues as to the best times to buy.
   

Long-term view on the 1W chart

• Observation: On the 1W chart, Bitcoin shows a long-term upward trend with several major corrections.

• Strategy: Long-term investors can take advantage of these corrections to increase their positions. Key support and resistance, fundamental analysis and the broad macroeconomic context are all important in making investment decisions.
   

Summary

Analysis of different time intervals allows for a more complex understanding of price movements and trends in the market. Scalping on short intervals, identifying short-term trends, analyzing major trends and long-term trading strategy are different approaches that can be used depending on the trader's preferences and goals. Practice in analyzing different time intervals and understanding how they interrelate is key to successful trading in the cryptocurrency market.