Multiple Time-Frame Analysis

Multiple Time-Frame Analysis - Trading Dispatch

Trading is about edge which, is basically your Win rate against your average risk to reward (RR). Using Multiple Time-Frames (TFs) can help your trading improve significantly by increasing your win rate. Your decisions are much clearer when they are based on the “Bigger picture”. The “Bigger Picture” is only clear when you can see the WHOLE picture of a single instrument. This is what Multiple Time-Frames can help you do. Now that you know why you should use Multiple Time-Frames, let’s break down how…

1, 2, 3!

Choosing TFs shouldn’t be too difficult. You can pick any as your higher TF. Most people usually pick between the Daily (D), the 4-Hourly (4H) and, the Hourly (1H).

A Higher TF is NOT the one you trade on. The Higher TF is the “Bigger Picture”. After you’ve chosen your higher Time-Frame. The next one is tradeable but the real cheese and biscuits are in the 3rd TF.

Higher Time-Frame (Trend)

Your Higher TF will help you identify the direction of the market. If we trend trade, we don’t ever want to trade unless we’re trading the direction of the trend. On Your higher TF, we identify DIRECTION.

You can do this one of two ways, Moving average crosses, and Trend-lines. But you need to identify a DIRECTION. Are you a bull or a bear?

Higher Time-Frame (Reversal)

A Higher TF can help reversal traders identify KEY LEVELS in the market on that particular instrument. Support and Resistance levels on Higher TFs are the ones you need to look out for when trading the smaller TFs. Now…by your being here and reading this I think I can get away with believing you’re a smart person.

You know that selling into strong support is a sucker’s move. But how could you know that you’re selling into a key support level if you don’t have a Higher TF to refer to? A higher TF will help you pick high probability reversal trades.

Middle Time-Frame (Confirmation)

One for the Money, Two for the Show

Your second TF, which will be lower, will act more as a confirmation TF. For the Trend traders, your second TF will let you know that price is in alignment with the “Bigger Picture” DIRECTION. For Example: You have identified a downtrend on the higher TF and your Second TF is also in a downtrend. This is good news for you and your kin. It means there’s cheese in the kitchen.

A reversal trader will use the second Time-Frame to identify contradicting price action as price approaches a KEY LEVEL. For example: If you have identified a KEY Resistance level and price on your second Time-Frame starts to print bearish candles (Dojis, Shooting stars, hangmen) you can safely assume that there may be cheese in the kitchen.

Lower Time-Frame (Execution)

And then there were 3…

Your third and LOWEST Time-Frame is where the magic happens baby. This time frame is where you play the game. After having looked at the “Bigger Picture” and having a lower Time-Frame that agrees with the bigger picture, now you can start looking for trading opportunities. Candlestick patterns, Crosses, Indicators, Harmonics, if you got it use it [Not literally all of those at once]. That’s where the game is played. Trend traders are looking for good pullbacks to trade, fib-zones, and Reversal traders could be looking for extensions, overbought/sold indicators, or double tops.

 

RECAP:

  • Your Higher Time-Frame gives you DIRECTION and KEY LEVELS.
  • Your Second Time-frame CONFIRMS DIRECTION and indicates LACK OF MOMENTUM.
  • Your Third and LOWEST TF is where you EXECUTE your trades and look for opportunities.

 

Don’t bet the farm.

Don’t lose your shirt.

Cut the L.

Keep the W.

Happy Trading.

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