Multiple Time Frame Analysis - Multiple Time-frame Analysis

Multiple time frames analysis in forex equals using 2 chart time-frames to trade forex currencies - a shorter chart timeframe is used for trading & a longer chart timeframe is used to check the trend direction.

Since it is always good to follow the trend, in Multiple Time-Frame Analysis, the longer chart timeframe gives us the direction of the long-term trend.

If the long-term market trend direction supports the direction of smaller chart time frame then the probability of being profitable is greatly increased. This is because even if you make a mistake when opening your trade the long term trend will eventually save you. Also if you trade with direction of the market trend, then mostly likely you will be on the winning side, this is what this multiple chart timeframe analysis is all about.

Remember there a popular saying by many Forex and stock market investors that says: "The trend is your best friend' - never go against the market trend.

There are 4 different types of traders - all these different types of traders use different charts to trade as explained below.

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

Scalpers

This group of traders holds on to their trades for only a few minutes. The scalper never holds on to a FX trade for more than 10 minutes. With goal of earning small sums of pips as a profit, 5 - 20 pips.

A Scalper using 1 minutes chart wants to go long, checks 5 min chart, which resembles the one below, since 5 min show trend is heading up, the scalper then decides from this multiple timeframe analysis it's okay to buy.

Day Traders

This group of traders holds on to their trades for few hours but not more than a day. With the aim to make quite a number of pips, 30 - 100 pips.

Day trader 15 min chart wants to go long, checks 1 hour chart, which resembles the one below, since 1 hour shows the market trend is heading up, the day trader then decides from this multiple chart timeframe analysis it's okay to buy

Swing Traders

This group of traders holds on to their trades for few days to a week. With the aim to make a large number of pips, 100 - 400 pips.

Swing trader using 1 hour chart wants to go short, checks 4 hour chart, which resembles the example below, since 4 hour chart shows the market trend is heading down, the swing trader then decides from this multiple timeframe chart analysis it's okay to sell.

Position traders

These group of traders are the investors that hold on to their trades for weeks or months. With the aim to make a large number of pips, 300 - 1000 pips.

Position trader using daily chart wants to short, checks the weekly chart, weekly chart looks like the one below, since weekly chart shows the trend is going downwards, the position trader then decides from this multiple timeframe analysis it's okay to sell.

How to Define a Trend - How to Define a Trend Using a Strategy

One can use a system that has Three indicators - MA Crossover System, RSI and MACD indicator and use simple rules for these indicator to define the trend. The rules of the system used to define a trend are:

Upwards Trend

Both Moving Averages Moving Up

RSI Indicator above 50 Mark

MACD Above Center-Line

Down-wards Trend

Both Moving Averages Moving Down

RSI Indicator below 50 Mark

MACD Below Center-Line

For More explanation about this trading system read: How Do I Generate Signals with a System Tutorial Discussed.