To trade effectively, you need to learn how to see charts, but how to be effective? One of the most successful and effective trading strategies for trading on any financial market is the use of multi-timeframe analysis.
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what is time frame in trading?
Dr. Elder invented this multi-timeframe trading strategy. He explains the reason for this unique and useful method in the section on practice. The multi-timeframe method described in This follows the basic concept of three timeframes.
When determining the existence and direction of the trend in the longest time frame, we then turn to observe the medium-term time frame to find an entry point. This time frame presents a strategy when the market is a retracement or correcting, a small correction bottom in an uptrend or a small rebound top in a downtrend is an ideal location for effective trades.
The main principle of the multi-timeframe method is that a successful trader needs to observe the market from different perspectives to understand and apply the important strategic components including trending and trend correction.
The main purpose of multi-timeframe trading is to enter a strong trend at the most appropriate times and price levels. This is after the counter-trend correction is over and the price then returns to the direction of the main trend. The important purpose of the shortest time frame is to find the best possible entry point.
What timeframes are there in trading?
If you are a 1 hour chart trader, then you need to identify the 4-hour chart as the longest time frame to trend. And if you are a trader using the 1-hour chart, then you need to define the 10-minute chart as the smallest timeframe to find entry points. Once the three timeframes are determined we can start applying this strategy. The longest timeframe represents the trend element of the strategy.
If a market is identified as not trending, a decision should be made to limit trading at that time. And if the market is determined to be trending up, only a Buy order should be executed. Conversely, if the market is determined to be in a downtrend, only Sell orders should be executed.
When the market breaks the main trend, then you should stop loss, this is a dynamic entry point. Because the breakout price to enter the trade will gradually move to a better price if the trade is not taken within a certain period.
Usually, the actual timeframes are as follows:
If you are trading long-term, use the base timeframe as the daily chart, the initial timeframe as the weekly chart, and the final timeframe as the monthly or quarterly chart.
When you trade medium term, use the base time frame H4 chart, the initial time frame is the daily chart, and the last time frame is the weekly or monthly chart.
If you are an intraday surfer then the base timeframe is the M15 chart, the initial timeframe is the H1 chart and the last timeframe is the H4 chart.
Why is multi-timeframe analysis important?
Many investors only focus on a one-time frame when trading in the forex market. Namely, long-term traders will often focus on 1-day or 1-week charts. While traders Surfers will only observe and look for opportunities on the 5-minute or 15-minute charts. This reduces the ability to cover as well as analyze the direction of the market because of a trend on the short-term charts. Could be just a small pullback on the long-term charts, so that also limits the chances.
The multi-timeframe analysis is essential. It will assist you to identify the overall trend of the market and important support/resistance levels. And assist you in determining entry and exit points, stopping loss, and taking profit more accurately. Importantly, increasing your win rate and reducing your risk when trading in the forex market.
Meaning of using multiple timeframes
Looking at the multi-timeframe chart when we analyze it will give us the exact time. Gradually we will have more confidence in our analysis, from which waiting, entering, and exiting orders will help us. We are much more efficient.
The multi-timeframe analysis gives you patience, if it shows that the price has not reached the entry point yet, you will be able to calmly and patiently wait, when the price approaches the target area, you will be decisive to enter the order. , and when the price enters the danger zone, you will also be decisive in exiting the order, and this patience is only available when you have enough faith in your trading system, that trust is formed. based on positive results after system testing and multi-timeframe analysis will help you to do that.
The multi-timeframe analysis is very important, it can help investors perfect their trading method and earn a lot of profit.