Creepiest Stock Trading Rule Nobody Can Explain

There are stock trading rules, and then there are the kind of creepy, "Why in the hell does this work" rules that nobody can explain "why" they work.

This almost falls into X-Files territory.

Amateur traders are confused by the different time frames they can look at on charts.

The problem is that most traders pick one timeframe and close their eyes to the others. A sudden move outside their timeframe hits them, and only then do they see that the larger trend was down.

How am I suppose to handle multiple time frames?

The factor of 5 links all timeframes. Look at a monthly chart. Notice that there are about 4.5 weeks to a month. Look at a weekly chart. Notice that there are 5 days to a week. Look at a hourly chart. Notice there are six 10 minute periods to an hour. Look at a 10 minute chart. Notice there are five 2 minute periods to a 10 minute chart. All of these charts are related by a factor of 5.

Some trading platforms have odd lot timeframes that don't fall into a factor of 5. In this case, calculate a factor which links at least 3 timeframes and then use it. Whether you use a factor of 3, 4, or 5 depending on your trading platform, just make sure that you stick with one factor as you moving up and down timeframes.

Ok, I got the factor of 5 but how am I suppose to actually trade with this?

The way master traders analyze any market is to analyze it in at least 2 timeframes. The timeframes should be related by a factor of 5. When you pick the 2 timeframes, the shorter of them has to be five times shorter than the longer one. If you want to trade using daily charts, you must first look at weekly charts. If you want to trade using 10 minute charts, you first need to look at hourly charts. If you want to trade using weekly charts, you first need to look at monthly charts.

Now why does the freaky factor of 5 rule applied to timeframes work? No one knows but the truth is out there, somewhere.