Having a multiple time frame trading methodology on how to draw support and resistance levels is a great way to supplement your trades using timely indicators as to when to enter and exit trades. It allows for more informed trading decisions, providing more stability in your trades.
This video will tackle a sound methodology on how to use multiple time frames to establish support and resistance levels that work in today’s market which may help you tremendously in your trading career.
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Multiple Time Frame Trading
Welcome to this video on multiple timeframe trading methodology; specifically, how to draw support and resistance trading multiple timeframes. There’s a couple of different ways that people like to do this with multiple timeframes – one would be to look for setups on the daily chart. For example, here on the left, we have a daily chart. By the way, it’s a stock here, but this applies to forex futures, commodities, whatever you’re trading. So people would say, I’m going to look for a setup on the long-term chart but I’m going to drill down to the short-term chart for a very precise entry, and you may be using that for day trading or swing trading. So fine, we find that that low does indeed hold and comes back. Then draw a support level at that line and let’s see what price that is
I’m bringing over my data box for you to get real specific here. That low is 41.36. Then we go over to our five-minute chart in this case, and you might use different timeframes. There we go – 41.36 on our five minute chart, we draw the support level on there and then we say going into the future now, we will be looking if the market comes back into the future: days, weeks, months, we will have a support level there from our long-term chart showing up on our short-term chart. Now, let’s see what happens and how well that works out for us. Little Hint, it’s not going to work out so great. Actually, let me just skip right to that section.
Multiple Time Frame Trading Strategy
So, here we are and this is that same level – 41.36 as you recall, but we’ve moved forward. In fact, that’s quite a bit into the future. However, let’s say that you were trading this particular day and you had the support level there from the daily chart, and it went forward into the future so that if the market ever got back to that level, you would say, I’m going to look to buy there, take profits there, whatever you’re going to do. Or perhaps even sell if it gets below that level, right?
So what happens is in that day the market comes below and doesn’t even seem to acknowledge its existence. It just, for the first hour, goes straight down. Of course, as you can see, it comes back up, goes above it, comes back down, above, holds it a little bit, etc. So, the bottom line is this – when you have these lines that are drawn off of a really long-term chart, a daily chart, and then you transfer that line over to a relatively short-term chart, they don’t provide precise support and resistance levels.
Now, does that mean that you shouldn’t put them on your chart? Absolutely you should have them on your chart, but I treat them a little differently. Actually, let’s go back to the long-term chart here for a minute. We don’t need this anymore. Let’s look at the daily and see how actually that looked on a daily chart. So this is how it looked on a daily chart. A couple of weeks later it came back down and that’s how it looked on a daily chart. So, we’d marked our initial support here – that would be in real time as we’re putting that level on.
Multiple Time Frame Trading System
On a daily chart, this looks great, right? That is definitely a nice bottoming candlestick pattern. It made a lower low, but it had a rejection of value of those lower prices, especially with this candlestick bar, and it headed back on up, so that’s great. But remember, that would be hindsight. If we wanted to trade that later, we potentially could.
That’s a basic concept, nothing really fancy here. The point is when I’m drawing a support level from a daily chart or from a long-term chart to a short-term chart – let’s just say that because I’m not really referencing any specific time intervals. But if they’re really far apart like that, then I will just mark it with a thick line like this in a later line to let me know that that’s what that is.
Multiple Time Frame Indicator
I’ve got that stored in my brain cells so that if I’m looking at it on a five-minute chart and I see this line, I will be like that is from a really long-term chart. Therefore, I do not expect the market to just come down and hold that line. I expect it to have more wiggle room. It’s a zone if you will, so I don’t even like calling support resistance lines, lines. I call them support resistance zones. So this whole zone here, we have to respect and acknowledge that even if it laces through it with dramatic energy as it did, I mean, that’s pretty dramatic energy for just to go like that. You might get the impression that this thing is just going to go south, or you might look for a throwback and then for it to go down.
But the point is here, don’t look for precision at these support resistance lines off of a long-term chart when you see it on a short-term chart. But you still should have them there because those levels are very important. Just figure out your own way of drawing it that makes sense to you and to distinguish it from short-term support resistance levels.
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