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The correct way of doing multiple time frame analysis

Multiple time frame analysis is all about bringing together the power of long and short trades.

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One of the key things that can make your trading activities more efficient is by using several time frames when analyzing the market. The bigger percentage of traders consists of those who only rely on a single time frame to meet their needs. This is the wrong approach to take because it leaves you at a disadvantage when it comes to getting the right signals.

Seasoned traders have to grapple with using several time frames during analysis. Traders who postpone their entry points until an appropriate momentum is reached have much higher chances of getting the right signals.

If you want to go this route too, you need to know exactly how to go about including several time frames on your analysis. Here is how to do it.

Go for the top-down analysis approach

For most traders who use multiple time frame analysis for the first time, the common mistake is to go from the lower time frames to the higher ones. This is not a great idea because the market will be seen from a unidirectional subjective point.

Most traders already come to the market with some pre-conceptions about what might happen. Going from low to high does not help in allaying the subjectiveness in any way. Using a top-down analysis approach, however, does the opposite. The trader is able to start from a broader view and from there, they can narrow down the view to the right signals.

Approaching multiple time frames with an open mind

Every trader has a particular frame which they are used to following when doing the analysis. The different kinds of time-frames are also useful for particular forms of trading. The goal of every trader is to go straight to the higher time frames every time they start the trade when using multiple time frames.

Doing this is not just recommended, it is obligatory if you have to get the most objective view of the market. You do not just need to look though, you also have to take down what you observe on the market. Having some writing materials with you every time you start the trade is important for your own organization.

The various charts that you observe can be marked and annotated with special points that mark the positions that interest you. Having such a routine allows you to build discipline and also approach your trades with a clear mind.

How you Should do Multiple Time Frame Analysis

FX Trading

After establishing the fundamental aspects of what analysis with multiple time frames involved, it is now time to look at the specific steps you should take when doing this kind of analysis. The most important thing to note is that you do not need to complicate the process. You just need to know what to do at each step.

Step 1: Check the Position in the Weekly /Monthly Frame

If your daily routine involves checking the hour-based time frames, it is important to take a break from them. After taking a quick glance at the general information on the hour time frames, you should proceed straight to the weekly /monthly frames so as to establish the long-term support and resistance levels.

Step 2: Taking on the Strategic Daily time-frame

When you finally get to the daily time frame, you should take your time to get the general direction of the market, especially for the upcoming week. The main things you should do when analyzing this time frame is to clearly demarcate the support and resistance lines. You should be sure to include the swing highs and lows on your chart.

Step 3: Executing the Trade

Finally, the 4-hour and 1 hour time frames are all about execution. After you have made all the necessary markings on the longer time frames, you finally have to narrow down to specific trade scenarios on the shorter time frames. You can easily do this by translating the ideas gathered on daily time frames.

Summary

Multiple time frame analysis is all about bringing together the power of long and short trades. The longer time frames allow you to stay focused on identifying viable trades on the shorter frames. Traders who focus on either of the two-time frames only are at a disadvantage of missing out on more than half of the market signals. This method of analysis is thus all about removing any biases that traders come with.

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