Multiple Time Frame Analysis in Indices Trading

Multiple timeframe analysis equals using 2 indices chart time frames to trade indices - a shorter chart time frame used for trading & a longer chart time-frame used to check the trend.

Since it's always good to follow the trend when indices trading, in Multiple Chart Time-Frame Analysis, the longer chart time frame gives us the direction of the long term trend.

If the long term trend direction supports the direction of the smaller chart time frame then probability of opening a profitable trade is greatly increased. This is because even if you make a mistake the long term trend will eventually save you. Also if you trade with direction of the trend, then mostly you'll be on the winning side - this is what this Multiple Time Frame Stock Analysis is all about.

Remember there's a popular saying by many investors & traders that says: 'The trend is your friend' - never go against the trend when trading.

There are four different types of traders - all these different types of traders use different chart time frames to trade as pictured below.

Examples of how each type of trader uses multiple chart Time Frames analysis strategy:

Indices Scalpers

Scalpers hold on to their stock trades for only a few minutes. Scalper trader never holds on to a trade for more than ten minutes. With the objective of making small amount of pips profit: 5 to 15 pips.

A Scalper using 1 min chart wants to go long, checks 5 min chart, which looks like the one below, since 5 min show trend is going up, then decides from this technical analysis it's okay to buy.

Best Time Frame for Scalping Stock Indices - Multiple Timeframe Analysis in Indices

Best Time Frame for Day Trading Indices

Day traders hold on to their open stock trades for a few hours but not more than a day. With the objective of making quite a number of pips profit: 30 - 60 pips.

day trader trading 15 minute chart wants to go long, checks 1 hour chart, which looks like the one below, since 1 hour shows trend is going up, then decides from this technical analysis it's okay to buy

Best Time Frame for Intraday Trading - Multiple Timeframe Analysis in Indices

Swing Traders

Swing traders hold on to their open stock trades for a few days to a week. With the objective of making a large number of pips profit: 100 - 250 pips.

Swing trader using 1 hour chart wants to go short, checks 4 hour chart, which looks like the example explained and illustrated below, since 4 hour displays the trend is going down, then decides from this technical analysis it's ok to sell.

Best Timeframe for Swing Trading - Multiple Timeframe Analysis in Indices

Position Stock Traders

Position indices traders are traders that hold on to their stock trades for weeks or months. With the objective of making a large number of pips profit: 300 - 800 pips.

Position indices trader using daily trading chart wants to go short, checks the weekly chart, weekly looks like the one below, since weekly displays the trend is going down, then decides from this technical analysis it's ok to sell.

Best Timeframe for Positional Trading - Multiple Timeframe Analysis in Indices

How to Define A Trend

Using a system that has 3 indices technical indicators - Moving Averages Cross-over System, RSI Indicator & MACD Indicator - and uses simple rules to define the trend. The rules are:

Upward Trend

Both MAs Moving Up

RSI Indicator Above 50

MACD Indicator Above Center Line

Downward Trend

Both MAs Moving Down

RSI Indicator Below 50

MACD Indicator Below Center-Line