Time frame analysis

Market Time frame is represented by candlestick on  a market chart therefore each candlestick represents how much data/ happenings and changes in the market for that period.

For instance a 1 minutes chart means every candlestick that is formed contains all  price happening/changes for just 1minute. And each candle takes only one minute to be formed.

Different time frames contain different records and can have different meanings to market traders.

As you try to analyse the market charts, you will notice a difference on charts on different time frames. For instance,1 minute chart may give a  sell signal and on looking at 5 minutes it’s a different story. That shouldn’t scare you thinking you are wrong. It is normal for markets to behave in such a manner. And do you know why? Traders enter the market at different times and have different opinions about the market.

Time frames range from 1minute to monthly. Like we said before each time period is represented by just one candlestick.

They are 1minute chart(M1), 5minute(M5), 15 minute(M15), 30minute (M30), 1 hour(H1), 4 hours(H4), 1 day(D1), week(W1) and 1 month(MN).

The Short time frames charts are known to have many trade signals but  most of them are false signals compared to longer time frames. So what can someone do to avoid being faked out in the market due to taking fake signals? use multiple time frame analysis.

Multiple timeframes.

Trading with multiple timeframe,you simply compare  price movements of the same currency pair on different time frames.

Look at smaller time frames in relation to the larger time frames and only enter a trade when the smaller time frame is in agreement with the larger time frame.

Since currency pair is moving across different chart time frames at the same time such as H1,D1,M1,W1, it means traders cannot have the same opinion about the market at different times.

As you try to analyse the market behavior, it is important to wait to enter until the smaller time frame is in agreement with the larger time frame.

Trading in the direction of the longer trend increases your chances of entering  trades with a higher probability of success. As a matter of fact a trader aims at increasing more odds/chances to his side  and increasing the winning rate/success  of the trade.

You need to first establish a trend/ direction of the trade using a larger time frame, after you have established a trend ,you then check  whether the lower time frame charts and the longer time frame are in agreement. Only then you can take position.

Let’s see how we can use different timeframes to analyse .

Let’s say for instance you trade only when you spot triple bottom on the market chart.  we all know that a triple bottom is a bullish reversal pattern therefore as we prepare to do our market analysis, we have to look into the uptrend scenarios.  First of all, you have to ask yourself this question, what time frame do you want trade? point it out. Then select your bigger time frame and smaller trading time frame and they should be relative to your trading time frame.

 In our example, if our trading time frame is an H1 chart,  the larger time frame would be H4 or daily chart and the smaller time frame would be the 30 minute chart. These time frames will help you do your analysis without having to spend all your time moving up and down from a 1 minute chart to weekly chart looking for setups.

The larger time frame gives you the over all market direction and helps you to identify any major price levels such as support and resistance levels and price highs and lows.

The trading time frame is where you execute your trades from, determines your stop levels and target levels, identifies your trading signals, is  where you apply your market tools and indicators and use it to find all traits and signals that would validate your entry.

The smaller time frame helps you to confirm your trade entry levels

Once you have chosen your trading time frame, do your analysis starting with the larger time frame going down to your trading time frame then to a smaller time frame. This is commonly termed as the top- bottom approach. Start with the Higher Time Frame chart, and then refer it to your trading timeframe chart, and then to the smaller time frame which will act as your entry and exit signal time frame .

It is so unfortunate that instead of using the top-bottom approach, most traders do the opposite by analysing instead from bottom to top.The problem is that when you start with a bottom to up approach, you will only concetrate on the smaller view trying to justify all the reasons to make your trading setup valid. You are likely to forget about the larger time frame which should be the most reason you should take a trade. 

As we go through this topic, you will be able to understand which timeframes to trade, why you should do multiple time frame analysis before executing trades  and why you should do analysis starting with a larger time frame to a smaller time.





Home Forums Topics

Viewing 17 topics - 1 through 17 (of 17 total)
Viewing 17 topics - 1 through 17 (of 17 total)

Learn BTC Trading


Follow us on Twitter


Welcome to Family!

%d bloggers like this: