Use Multiple Time Frame Analysis - XM


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The 6-hour chart shows a bearish engulfing pattern which occurred at the same time that a Stochastics cross 85 occurred.  This also occurred at R6 resistance.

MTFA: Multiple time frame analysis in Forex trading

You have to remember, a trend on a longer time frame has had more time to develop, which means that it will take a bigger market move for the pair to change course. Also, support and resistance levels are more significant on longer time frames.

Multiple time-frame analysis in Forex trading | Forex4you Blog

A practice that is very common among retail traders is that trade analysis and entries are done using the short term charts without any recourse to the long term charts. This is wrong practice. Most institutional traders have a bulk of their orders in the market for the long term. As such, it is not correct trading practice to totally ignore what is happening on the long term charts and simply make all decisions off the short term charts. Of course there are times when short term trading is the order of the day (in news trades for instance), but most of the time, the trader has to do something about getting information on the long term picture for the currency pair in question.

Multiple Time Frame Analysis: 3 Easy Steps to Succeed

See point B in the figure above, the market is in a downtrend in the 65-minutes after it completed a failure swing. However if you look at the 9-hour chart, you can see that only the wave is down but the trend is still up. So if you just looked at the 65-minute chart you would have sold at the point where the market would recommence its uptrend.

The selection of what group of time frames to use is unique to each individual trader. Ideally, traders will choose the main time frame they are interested in, and then choose a time frame above and below it to complement the main time frame. As such, they would be using the long-term chart to define the trend, the intermediate-term chart to provide the trading signal and the short-term chart to refine the entry and exit. One note of warning, however, is to not get caught up in the noise of a short-term chart and over analyze a trade. Short-term charts are typically used to confirm or dispel a hypothesis from the primary chart.

Technical traders have a saying: "trends exist within trends". Have you heard of it? It boils down to something like this. Looking at a daily chart, the trend may be an uptrend, however, on a 9-hour chart the trend may be down and looking at the 6 hour chart it may be flat, and so on within the same pair.

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A swing trader should analyze the short-term trend by studying price action on a ten-minute chart, which covers ten days of trading activity. As we saw on the 65-minute chart, the ideal purchase would have occurred as the buyers gained control of the short-term trend when they pushed the stock past short-term resistance at $ the ten-minute time frame shows this level in greater detail. While the ten-minute time frame does not offer any particular advantage over the 65-minute time frame in the case of STTS, it does often provide greater detail that allows us to fine tune not only our entry price but also where to place our initial protective stop.

There are certain trades that should be performed on the short-term time frame. Since smaller fluctuations in price action become clearer, a Forex trader is better able to select an attractive entry for a position whose direction has already been identified by the charts of higher frequency.

The projected target for such a breakout was a juicy 75 points. With the two charts in synch, HOC was added to our watch list as a potential trade. A few days later, HOC attempted to break out and, after a volatile week and a half, HOC managed to close over the entire base.

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