TIMEFRAME DELIRIUM SYNDROME
Admittedly, I am a bit egotistical and somewhat arrogant regarding my views/philosophies with respect to investing and finance. I don't necessarily like to keep an open mind. Or rather, I should say, I don't like to have my mind opened by others for fear that it will cause me to deviate from a process of investment that has been 18 years in the making. Perhaps a better way to put it is that I appreciate the process of organic discovery coming as a result of the process I have developed.
This appreciation for my own process leads me to ignore a majority of the views and opinions that swirl around me on a daily basis. It goes a step beyond that in the people who I choose to follow on Twitter. I will never follow an individual who has the potential to influence my opinion. Therefore, if I am following you it is because a) I like you but don't care about your market views or b) consider you an excellent source of data that has no consequence over my investment process or c) consider you a source of entertainment.
This is one posting I couldn't ignore, however. A very good informational piece was posted today by Josh Brown @reformedbroker referencing an article about confusing your timeframe with that of others. It such an important concept that seems to be an area of confusion for so many. I would encourage you to look it over, giving it the appropriate consideration.
As my process has evolved so has the need to look into longer time frames in order to accurately judge the path of a particular investment. The longer you move in terms of timeframe, the less noise you will have from what occurs on a daily basis, instead getting to the essence of price and volume behavior.
There is always a tradeoff, however. The tradeoff with zooming out is that you have to be able to withstand increased risk. The price movement of a weekly or monthly chart spread out over a couple of years will encompass a price picture that is wide in its area of movement. Finding a means of balancing that risk while taking advantage of the clarity in price picture is perhaps the key to be able to using wider timeframes effectively.
It is important to always keep an eye on the original timeframe you had for the investment to make sure you aren't deviating from it simply for the sake of an investment or trade gone wrong. As pointed out in the article, a common mistake is turning a trade into an investment simply because it hasn't worked out in your favor. It is the mark of an amateur, as well as being indicative of an ill conceived trading plan with little discipline.
I will be posting the weekly review tomorrow night as I am away from the office, returning tomorrow.
