Multiple Time-frame Analysis
Multiple time frames analysis equals using 2 chart time frames to trade stock indices - a shorter one used for trading & a longer one to check trend.
Since it's always good to follow the trend, in Multiple Chart Time-frame Analysis, the longer timeframe gives us the direction of the longterm trend.
If the long-term market direction supports the direction of the smaller time frame then the probability of being profitable is greatly increased. This is because even if you makes mistake the long term trend will eventually save you. Also if you trade with direction of the market, then mostly you will be on the winning side, this is what this market analysis is about.
Remember there's a popular saying by many Indices and stock market traders that says: "The trend is your friend' - never go against the stock market.
There are 4 various types of traders - all these use different charts to trade as illustrated below.
Examples of how each type of trader uses multiple Stock Indices time frames analysis strategy:
Scalpers
This group holds on to their trades only for a couple of minutes. The scalper never holds on to a trade for more than ten minutes. With main objective of earning small amount of pips profit: 5 - 20 pips.
A Scalper using 1 minute chart time frame wants to go long, checks 5 minutes trading chart, that resembles the one below, since 5 minutes show trend is heading up, then decides from the analysis it's okay to buy.
Day Traders
This group holds onto their trade transactions for few hours but not more than one day. With main objective of earning quite an amount of pips: 30 - 100 pips.
A Day trader trading 15 minutes trading chart time frame wants to open long, checks H1 chart, that resembles the one below, since 1 hour highlights market trend is heading up, then decides from the analysis it's okay to buy
Swing Traders
This group holds onto their trade transactions for few days to a week. With main objective of earning a large amount of pips: 100 - 400 pips.
Swing trader using H1 chart time frame wants to go short, checks 4 hour chart, that resembles the stock trading example explained and illustrated below, since 4 hour highlights the market trend is moving down, then decides from the analysis it is okay to sell.
Position traders
These are the traders who hold onto their trades positions for weeks or months. With main objective of earning a big amount of pips: 300 - 1000 pips.
A Position trader using the daily chart time frame wants to open short, checks weekly chart, weekly looks like one below, since weekly portrays the market trend is heading down, then decides from the analysis it's okay to sell.
How to Define A Trend
Using a trading system has Three indicators - Moving Average Cross Over System, RSI & MACD & uses simple guidelines to define the trend. The rules are:
Upward trend
Both MAs Moving Up
RSI Indicator above 50 Mark
MACD Above Centerline
Downwards Trend
Both MAs Moving Down
RSI Indicator below 50 Mark
MACD Below Center-Line
For More details about this system read: How to Generate Trade Signals with a System.
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