Were not entirely sure where this statement originated from, but it is certainly one that should be memorized.To get more news about
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What is a multi-timeframe approach?
Its no secret that adopting a multi-timeframe approach can enhance
your trading. The problem, however, is that some traders find it
difficult to determine which timeframes to select, as well as how to go
about using the method to its fullest. Hopefully, the following article
will help clear this up.
Explaining what a multi-timeframe approach is may be best done using an analogy. Imagine driving down a poorly lit road in the evening
with faulty headlights. Odds are that you‘re likely to experience a
bump, or worse, an accident, as it’s impossible to see what‘s ahead!
Well, this is exactly what you’re doing should you focus your attention
on just one timeframe. Not knowing if you‘re buying into a
higher-timeframe resistance or trading against the overall trend, makes
tackling the markets all that more difficult. As such, a multi-timeframe
approach provides a way of observing the entire market you’re trading
using additional timeframes.
What timeframes should you track?
Heres where a lot of traders struggle to find their feet.
What timeframes one follows will depend on what the trading approach is. For example, are you an investor with long-term
convictions, a swing trader that holds trades for a few days/weeks, or
do you favour the intraday charts?
For the sake of this article, let‘s say that you’re a trader that does not have much time to be at the computer and has adopted a swing
trading method. You chose the H4 chart as your base timeframe. A base
timeframe is simply one that you will enter trades from. Think of this
timeframe as your go-to chart.
Once you have this in place, the next step is to select your partner timeframes. We usually appoint two additional higher timeframes
to complement the base. Therefore, a good fit for a H4 base might be the
daily timeframe and the weekly, or even monthly, timeframe.
It is said that a top-down approach is an objective way to analyse the markets, as you‘re starting with a broader view and working your way
down. While we agree with this statement, we don’t see much difference
between beginning from the base and working up or starting from the top
and working down. You end up with the same picture, regardless.
To conclude this section, here is a guide we follow when using a multi-timeframe approach. Granted, it may be simple, but it has held us
in good stead thus far:We are currently watching a trade that
demonstrates why utilizing a multi-timeframe approach is so
advantageous.
A lot of traders use the additional timeframes to gauge trend direction. Though this is certainly something we look at, there is much
more one can harvest from this approach.
Comprised of a H4, daily and weekly timeframe, here is a quick snapshot of the AUD/USD chart:Lets start from the top and work our way
down. On the weekly timeframe, we can see that there is an AB=CD 161.8%
Fib ext. at 0.7496 that aligns with a 50.0% value at 0.7475 (taken from
the high 0.8125). By and of itself, this is an attractive structure! In
conjunction with weekly price, however, daily price shows little active
demand to the left of current price, suggesting that a move down to
support at 0.7505 may be on the cards. So, at this point, not only do
you have strong weekly structure around the 0.75 neighbourhood; you also
have a daily support as well. Things are looking good so far! Moving
across to the H4 timeframe, the unit is seen trading beneath resistance
at 0.7576. Also notable is the 0.75 handle seen below.
From this analysis, it should be clear that 0.75 represents a solid base to buy from. Yet, without bringing in the additional timeframes,
0.75 would have likely been just another psychological base to keep an
eyeball on. With a multi-timeframe approach were able to see the true
value 0.75 offers.
Given the recent move higher on the H4 scale, one could also surmise that the aforementioned H4 resistance is a worthy sell zone. We
say this because both the weekly and daily timeframes show room for the
market to move as low as 0.75. Nevertheless, the H4 resistance, at least
for us, would require additional confirmation before pulling the
trigger, whereas the 0.75 handle, depending on the time of day, would be
good enough for a pending order.
What about an exit plan? Well, we personally try to keep it as simple as possible. We follow our base timeframe for partial exits and
look to liquidate the full position at an opposing higher-timeframe
zone. This typically allows one to maximise gains.
