Multi Time Frame Trading – A Price Action Strategy
Multi Time Frame Trading:- today I would like to discuss a concept with you that is sure to increase your winning ratio.
The concept is simple. It involves using one currency pair over multiple time frames to get a general feel of the overall market direction. Support and Resistance Lines are set as majors and minors. Major Support and Resistance Lines are set on the higher time frames for example the 1 hour or 4 hour charts and minor lines on the lower time frames such as the 5 minute or 15 minute charts. Multi Time frame analysis enables ato increase the probability of winning trades and minimise risk.
“Your capital may be at risk. This material is not investment advice.”
It is important to understand that price action tends to respect major support and resistance lines more than the minor support and resistance lines. You can apply the concept for bothtrading and counter-trend trading techniques. As a visual aid it might be worth colouring these lines differently so it is easily verifiable.
Taking EUR/USD H1 Chart as an example we can see that clearly the prices where prices have respected before a trend reversal occurs.
Now we look at 15 minutes and see what this same picture looks like.
We can see that the price bounced off 1.10702 indicating a major resistance line. Notice how the few indicators all followed the same path. Indicators shown here include
- Bollinger Bands by John Bollinger
- Parabolic Sar
- Hull Moving Average (12)
- RSI Indicator 7 and 14.
This indicators are not essential but they strengthen the validity of the time frame analysis.
How Multi Time Frame Trading works?
Understanding what happens over a longer period of time will give you a clear understanding of the trend. This thus enables you can make more clear, concise and accurate decisions when looking for trading opportunities on the smaller time frames.
If there is a long-term trend on a higher time frame, then trading in theof that trend on the lower time frame is likely to produce a higher probability of winning trades.
H4 and Daily Time Frames
Support or resistance levels identified on these mega levels can be particular useful to identify a powerful turning point commonly referred to breaking the trend or break out strategy.
Once a support or resistance level has been established on the higher time frame, Use the lower time frame, say the one hour charts to fine tune the entries.
Placing Trades for Binary
For Binary I would take a put at the major using the 15 minute for entry based on higher time frames for atleast 2 candles. So in this case 45 minutes to an hour would be ideal.
Placing Trades for Forex
I rarely go short on Forex . If a major level has been identified on H4 chart or Daily Level then you can use the H1 chart for fine tune the entries. The Stop Loss would be set above the support line to prevent markets from clearing the stops by retesting these levels.
Multi Time Frame Analysis Summary
Multiple Time Frame analysis is important and should be part of the trading plan of any binary or forex trader.
Use higher time frames for support and resistance levels and smaller time frames for fine tuning.
- For Forex stop loss should be set above resistance and below support. Take Profits should be set at the next support level or resistance level.
- For Binary trades should be at least 2 candles long.
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