Multiple Time Frame
When deciding on a trade or investment, be it short,
intermediate or long term, multiple time frame analysis
can help clear the noise and offer a balanced view.
Multiple time frame analysis!?! It sounds complicated
and fancy, but it simply refers to the same chart with
more than one time compression (e.g. daily or weekly).
When both the weekly and the daily charts are in
harmony, the chances of success can be greatly enhanced.
The essence of the strategy is easy: Use the higher time
frame price activity to define the tradable trend as
well as potential support and resistance levels.
Markets exist in several time frames simultaneously.
They exist on a 10 minute chart, an hourly chart, a
daily chart, a weekly chart, and any other chart.
Traders often feel confused when they look at charts in
different time frames and they see the markets going in
several directions at once.
The market may look for a buy on a daily chart and a
sell on the weekly chart, and vice versa. The signals in
different time frames of the same market often
contradict one another. Which of them will you follow?
Most traders pick one time frame and close their eyes to
others until a sudden move outside of their time
frame hits them.
Daily charts are great, but participants can get caught
up in the move of the moment. Even though daily charts
can contain random movements, they do have their
strengths. Once an underlying trend is identified, daily
charts can be useful to pick entry and exit points. On
the other hand, weekly charts filter out the random
movements and can help identify the stronger under
currents that are driving the price.
The same idea applies if you are trading any security on
a daily basis, in which case, the weekly bars will be
the basis for the trend as well as the important support
and resistance points. That is the foundation of
multiple time frame trading. Besides the effectiveness
of using a method based on a multiple time frame
approach, another advantage is the method need not be
complicated. A trader can make his or her method as
simple or as complicated as desired. For us at
www.TradersEdgeIndia.com, the simpler the application,
the better the results.
The proper way to analyze any market is to analyze it in
at least two or three time frames. If you analyze daily
charts, you must first examine the weekly charts and so
on. This search for greater perspective is one of the
key reasons for the success of our
newsletter services.
Look at the daily chart of NSE Nifty below. What does it
tell you. Most traders would say that it is just the
beginning of a downtrend and would be happy to short the
market all th way down. Well, most traders are not
successful! To be successful in trading any market, one
has to first examine the trend on a higher time frame.
Now look at the chart below of the same security. This
is a chart of one time frame higher than the one above.
What does it tell you? Simply, that the long term trend
is bullish, and I should be looking to go long rather
than short.
To make our trading signals more accurate and to provide
you with the edge in trading our analysis which goes
into each of our newsletter
services incorporates not one but all three time
frames. By incorporating the multiple time frame
trading method in our newsletter services, you as our
subscribers will take only those trades with the most
profitable potential and to stay out situations where
there is marginal or least profitable potential.
This our newsletter services
will help and investor or trader to get into the real
trend and stay out of most range bound trading that eats
away at your profits.
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