Trading with Different Time Frames
Multiple time frame analysis is one of the powerful tools that is used by traders to multiply their probability of being successful in trade while minimizing the risk.
This great concept involves observing different time-frames for a specific asset and identifying the overall market direction on the higher time frames comparing it with, the lower time frames.
Since there is no specific number of times you can use to monitor the frequency, most practitioners use general guidelines.
Here are some of them….
Trading with different time frames always gives you a wide knowledge on the reading market.
Three different periods will provide you with an average figure.
Using a fewer periods than three sometimes leads to loss of data and using more than three might give you a redundant analysis that may not be of a resounding help to you.
If you choose the three-time frequency, you can use a simple strategy known as the rule of four.
The medium term period is first determined of which it represents the standard period at which the average trade is held.
A short term time frame is then determined by taking a quarter of the intermediate period.
For example, a 60-minute chart for the intermediate time frame should have 15 minute chart for the short term time frame.
A long term calculation is then calculated by multiply the intermediate time frame four times.
In this case, it should be 240 minutes that is four hour minutes chart.
This is the average time of the three frequencies.
It is very important to select the correct time frame wisely when choosing the best range among the three periods.
Long term holders who retains his or her positions for months may find it using shorter time frames irrelevant.
At the same time, a trader who holds the position for a few hours will find looking at weekly or monthly charts not so helpful.
We hope you have enjoyed this tutorial…
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