Multi Time Frame Trading Strategy
Multi Time Frame Trading Strategy - There are several reasons why traders use multiple time frames at once in an analysis. First of all, approaching analysis from a high to a lower time frame will provide opportunities without many obstacles, plus the ideal short-term trading setup.
In addition, finding a meeting of several resistance support from a variety of time frames is the most promising technical analysis tips to identify areas of supply and demand.
For example, you can start by looking at the Daily chart to identify the long-term trends that are currently prevailing in the market, whether bullish, bearish or sideways. You can find these trends from key technical levels (support resistance according to Price Action, Fibonacci, MA, etc.), or prominent patterns from Candlestick formations or price waves.
After finding a long-term trend, you can then go down to a smaller time frame, for example H4. Use the same analysis method as when you identify trends in the previous time frame, then observe how the results. If Daily and H4 reflect the same trend, then the base entry based on the trend will obviously be more promising, than you open the position from the analysis in just one time frame.
What needs to be noted, the core strategy of the multi time frame is finding confluence between the trends in the various time frames you use. So the key does not lie in the indicators or methods of technical analysis that you use.
Another great benefit that you can get from the multi time frame strategy is the help of risk management that is more in line with the price opportunities on the chart. Usually, risk management is always adjusted to the tolerance of losses or the target of ideal profits according to your psychology as a trader. This is indeed not wrong, but sometimes it is not prospective because it does not take into account the price analysis in it.
So how do you manage risk with a multi time frame strategy? It's easy, you just need to adjust the Risk / Reward Ratio with the potential for price movements at a high time frame. Let's say you use the Daily chart to find out the long-term trend, then base the entry position on the H4 time frame, then setting the Risk / Reward Ratio can be based on the Daily chart.
For example, you open a position with a risk management rule that uses 1% of all capital, with Stop Loss 50 pips from the open position price on the H4 chart. If you see the possibility that the price can continue the trend as far as 300 pips on the Daily chart, then adjust the Risk / Reward Ratio with that opportunity. So, you don't use a 1:2 ratio, but 1:6.
As with the principles that apply in almost all joints of life, "too much is not good". The same thing applies to the selection of time frames in this strategy. Generally, the ideal number that can be used is 2-3 time frames. How little?
Remember, the focus of this trading strategy is not how much, but how effective your method is. Even using 10 time frames will not guarantee your strategy is more profitable than those who only use 2 time frames.
In order for your strategy to remain effective no matter how many time frames it is, always keep in mind that a high time frame displays a major (long-term) price trend.
Regarding the selection of the right time frame, you can base it on your own trading system. For example, if you are a short-term swing trader, then you can use a combination of Daily and H4 like the example above. If you want to use 3 time frames, add Weekly charts above the Daily.
While if you are a mid-term trader, then use a combination of Weekly and Daily charts, with consideration of term analysis in the Monthly chart. On the other hand, for those of you who like short-term trading or scalping, then use the H4, H1 and M15 time frames. In analyzing, you should use the time frame in the order. Observing trends on the Daily chart then the entry position on the H1 chart is not recommended, because the distance that is too far away makes the relationship between price movements in both time frames irrelevant.
So a little discussion about tips on using a multi time frame strategy. Always remember that the core of this strategy is observing trends that confirm each other at various time frames. You can also use this method to adjust risk management with an accountable technique. Hopefully useful and good luck.
In addition, finding a meeting of several resistance support from a variety of time frames is the most promising technical analysis tips to identify areas of supply and demand.
For example, you can start by looking at the Daily chart to identify the long-term trends that are currently prevailing in the market, whether bullish, bearish or sideways. You can find these trends from key technical levels (support resistance according to Price Action, Fibonacci, MA, etc.), or prominent patterns from Candlestick formations or price waves.
After finding a long-term trend, you can then go down to a smaller time frame, for example H4. Use the same analysis method as when you identify trends in the previous time frame, then observe how the results. If Daily and H4 reflect the same trend, then the base entry based on the trend will obviously be more promising, than you open the position from the analysis in just one time frame.
What needs to be noted, the core strategy of the multi time frame is finding confluence between the trends in the various time frames you use. So the key does not lie in the indicators or methods of technical analysis that you use.
Multi Time Frame Strategy for Risk Management
Another great benefit that you can get from the multi time frame strategy is the help of risk management that is more in line with the price opportunities on the chart. Usually, risk management is always adjusted to the tolerance of losses or the target of ideal profits according to your psychology as a trader. This is indeed not wrong, but sometimes it is not prospective because it does not take into account the price analysis in it.
So how do you manage risk with a multi time frame strategy? It's easy, you just need to adjust the Risk / Reward Ratio with the potential for price movements at a high time frame. Let's say you use the Daily chart to find out the long-term trend, then base the entry position on the H4 time frame, then setting the Risk / Reward Ratio can be based on the Daily chart.
For example, you open a position with a risk management rule that uses 1% of all capital, with Stop Loss 50 pips from the open position price on the H4 chart. If you see the possibility that the price can continue the trend as far as 300 pips on the Daily chart, then adjust the Risk / Reward Ratio with that opportunity. So, you don't use a 1:2 ratio, but 1:6.
Time Frame How Many Can Be Combined?
As with the principles that apply in almost all joints of life, "too much is not good". The same thing applies to the selection of time frames in this strategy. Generally, the ideal number that can be used is 2-3 time frames. How little?
Remember, the focus of this trading strategy is not how much, but how effective your method is. Even using 10 time frames will not guarantee your strategy is more profitable than those who only use 2 time frames.
In order for your strategy to remain effective no matter how many time frames it is, always keep in mind that a high time frame displays a major (long-term) price trend.
Regarding the selection of the right time frame, you can base it on your own trading system. For example, if you are a short-term swing trader, then you can use a combination of Daily and H4 like the example above. If you want to use 3 time frames, add Weekly charts above the Daily.
While if you are a mid-term trader, then use a combination of Weekly and Daily charts, with consideration of term analysis in the Monthly chart. On the other hand, for those of you who like short-term trading or scalping, then use the H4, H1 and M15 time frames. In analyzing, you should use the time frame in the order. Observing trends on the Daily chart then the entry position on the H1 chart is not recommended, because the distance that is too far away makes the relationship between price movements in both time frames irrelevant.
So a little discussion about tips on using a multi time frame strategy. Always remember that the core of this strategy is observing trends that confirm each other at various time frames. You can also use this method to adjust risk management with an accountable technique. Hopefully useful and good luck.
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