Hello, my friend, and welcome to this tutorial on Multiple Time Frame Trading Methodology. In this post, we will discuss how to use different time intervals (a multiple time frame system) and tightly correlated time frames in your trades to get the best out of this methodology. Enjoy!
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Multiple Time Frame Trading Methodology – Video
Hey, welcome to this video on trading across multiple timeframes, especially focusing on Forex swing trading, but the principles apply to various markets. Multiple timeframe trading is widely used and for good reason, as I personally incorporate it into my approach. However, I want to emphasize a critical point in this video – a common mistake that can potentially save you a lot of money.
How to Use Multiple Time Frames the Right Way! – Multiple Time Frame Trading Methodology
In this specific example, I have a 5-minute chart on the right and a 60-minute chart on the left. The exact intervals and markets are not crucial; the principle holds for any timeframe and market. The key concept is using a shorter timeframe (5 minutes) for identifying trade setups and a longer timeframe (60 minutes) for confirmation, acting as a filter to avoid false signals.
Here’s the crucial point: when the two chosen timeframes are too far apart, it can lead to a significant problem. In this scenario, where the 5-minute chart has a one-to-twelve ratio with the 60-minute chart, precision is compromised. For every bar on the 60-minute chart, there are twelve bars on the 5-minute chart, resulting in a lack of consistency and accuracy in trading.
Inaccuracies to Watch Out For When Using Multiple Time Frames – Multiple Time Frame Trading Methodology
To illustrate, I discuss a few examples using different indicators on the 60-minute chart for confirmation. The problem arises when these indicators provide conflicting signals due to the time lag between the two timeframes. Whether going long or short, the lack of synchronization can lead to missed opportunities or premature exits.
Wrapping Up!
My recommended solution is to use a 1-to-3 ratio or a 1-to-4 ratio for tighter correlation between the timeframes. For instance, if trading on a 5-minute chart, use a 15-minute chart for confirmation. This approach ensures faster signals on the longer-term confirmation chart without sacrificing precision.
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