Avoiding tunnel vision
Trading the markets is mentally demanding, especially when working with the intraday trading ranges that bounce often though irregularly. Traders who focus on short time frames often become exposed to the effects of tunnel vision, looking at a chart and a position in only one way. Tunnel vision can lead to large losses, especially when long term trends and chart patterns make their mark on short chart frames.
A head and shoulders pattern may only yield 25-50 cents on a minute chart, but on a daily chart, price swings of $2-3 should not be unexpected. This is where tunnel vision is the most dangerous, fundamentals move the market in every timeframe but technicals work differently in each. A five minute chart may show the price on a short term support level though the long term shows strong horizontal resistance less than a dollar above the current price. With tunnel vision you’d see either a strong bullish signal on the short term and a strong bearish signal on the long term. If you’re looking at all charts, you’d see a sideways trend in the works and be able to profit from the ups and downs.
One tip for avoiding tunnel vision is to use charts that allow you to save your trendlines. Charting the long term trendlines when the market is not in session then applying them to the short game will help you improve your odds. Sometimes, simply changing the chart from a daily candlestick to a weekly candlestick will thin out the chart and allow you to see support and resistance levels you didn’t see earlier or allow you to focus in on bigger candlestick patterns.
Tunnel vision comes with applying technical analysis and there is simply no way around it but to keep a keen eye on the market at all times. Again, fundamentals will apply themselves the same to every timeframe but technicals work differently on each timeframe.
