Professionals who want to do technical analysis follow a few broad timescales, called “windows”. Traders use windows to see how much profit potential there is for specific asset classes. By following a few windows, you can see what asset classes are over or undervalued when you use those windows.
Some traders follow a window for a single sector or asset class. Others follow several windows, looking for trends and patterns. And some use several windows for a longer time frame.
The chart shown here illustrates the five windows’ windows.
As you can see on the chart above, using just one window might not be enough to profit from an entire sector or asset class. Therefore, some traders might follow one or more windows within some time frame.
By following several windows in different timing ranges, or using windows that include multiple asset classes, you can see which asset is over-or-undervalued based on the window you follow. This will help you predict the best time to buy or sell your equity or commodities.
How does a window work?
A window works by looking at the past (in this case, the past 10 years) for securities or indexes you like and then using a computer to draw a “line,” or “basket”, over those timescales. This line defines a point in time when the current market is up. If you choose to follow a window, you can then follow that basket line.
A basket line is drawn because it serves as a way to look at the past without going to all the technical or fundamental indicators and to find a better time for a trade. For example, if you want to trade a portfolio of blue-chip stocks or technology stocks, you would use a basket line instead of moving averages or other technical indicators.
It’s important to keep in mind that a basket line is very different from the daily charts and forecasts that are usually generated for technical analysis.
What’s the difference between different windows?
The following chart shows the different windows used in various timeframes. It helps explain the difference between a window and a basket line.
As you can see, all of the windows are drawn with a bar chart. (We’re not saying that these charts don’t make any sense; they do.)
A bar chart is drawn to separate a few indicators over the next hour or so.
The chart below shows the daily basket and daily window for the S&P 500 index (
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