Picking a direction in trading is one of the hardest parts to master. Choosing your timeframe is also a hard part many traders struggle with. This video aims to help with that by giving you simple ways to make those choices.

Video Transcript

Multiple time frame analysis, how to decide which market reversal alerts you should be taking. Because obviously the indicator has no idea which way price is going. All it’s designed to do is show you when there is a strong move in the opposite direction and a potential shift in market structure and direction of the trade is going to happen. So we need a way to filter out signals given by the indicator or any indicator that we use for trading. And the main way people tend to do this is with multi-time frame analysis. Now there’s different schools of thought on this. A lot of people like to use two time frames, which is the most common. Some people use three time frames.

But whichever way you look at it, the time frame you use for your trend direction should always be above the one that you’re currently looking at. And the trick to multiple time frame analysis is to make sure the time frames you’re using are not too close together but also not too far apart. So there’s a few pairings which tend to work very well together and these are M5 for scalping and the hourly time frame for trend direction, M15 and the 4-hour or the daily for trend direction. The hourly for your trade entries and then using the daily for trend direction or the 4-hourly for your trade entries and using the weekly for trend direction. Now you can use any combination you like but those tend to work well together because of those pairings you’ve got a minimum of sort of 15 to 20, 25 candles between the low time frame that you’re looking to enter on and the higher time frame that you’re using for your trend bias. So what I would recommend is that you look at the different time frames available in the pairings and decide what type of trader you’re going to be and which time frames you think you’re going to be using. So if you are working full-time for example and you can only look at your charts when you get home at night you can’t be trading on M5, M15 or hourly charts very easily. Hourly at a push you may be able to but more commonly your time frame is going to be the four hour time frame. If you’re at home all day long and you can trade anytime you like you might select to use the 15 minute charts or the hourly charts and higher time frames for your buyers from there.

If you’re serious about trading, you want to scalp and you want to be in and out the market constantly as a day trader, you’re probably going to be looking at M5, in which case you’re going to be using the hourly or possibly the four hourly for your trend direction. So you need to know which time frames to use and once you’ve decided, you need to stick to them because it’s important that you do your analysis on those time frames and you stick to those time frames otherwise you’re going to get confused as the markets are very fractal and you’ll see that the big moves playing out on the higher time frames exactly those same patterns are playing out on the lower time frames but multiple times as price moves on the higher time frame. So if you use H4 for your trend for example and you use the M15 for your entry and then as soon as you get into a trade you start looking at the hourly charts that’s going to give you different signals and different bias to the 4-hour which is going to confuse you and that’s one of the prime reasons people get out of trades too soon is because they look at a different time frame and they see something different happening.

So you need to pick your time frames and you need to stick to your time frames. Now, when we’re using multiple time frame analysis, there are different ways that we can come to our bias for trend direction to identify which way we want to take our trades. One of the most commonly used is the moving average. So what people tend to use is the 200 moving average or maybe a 50 moving average from the time frame that they’re currently looking at. Now, that’s not really the best way to use the moving averages what you should be doing is looking at those moving averages on your higher time frame and entering on the low time frame in the direction of the moving average of your higher time frame. So for example if we were going to enter on the one hour chart we should be looking at what the daily 200 or 50 or 100 or whichever moving average we want to use is telling us to trade. So if price is above the 200 moving average on the daily for example, we should be taking long trades only on our one hour chart. And you can use whichever moving average you want to. It could be a simple and exponential, whatever you want to use. But the 200 and the 50 tend to be the key ones which people tend to use the most often. The other way you can identify higher timeframe bias and trend direction is by using the setting already built into the market reversal alerts indicator.

Now one of the strategies that is incredibly reliable with the indicator is the multi-timeframe entry strategy and what the indicator will do is it will draw onto your chart the last alerts from the indicator on your higher time frame. So for example, if we’re entering a trade on the one hour time frame, we can choose to have the indicator also show us the most recent alerts and the most recent rectangles drawn in to support price from our higher time frame, which in this case, we would use the daily. And what this allows us to do is automatically have a trend bias on our screen so that whenever we get an alert and we look at the chart it will tell us in the bottom left hand corner exactly which direction we should be trading in to stay in line with the most recent market structure shift on the higher time frame. So all we’re doing here is we’re saying if the daily has had a recent alert to go long we want to be taking longs on our lower time frame. Until the daily has a market shift in the opposite direction, i.e. weak price action in the other direction, then we want to start looking at taking short positions. And those alerts and the rectangles which support price are also drawn onto your chart for you. And another good strategy to use, which we’ll cover in the strategies section, is taking trades when price gets back into those areas on your lower time frame charts. So those are two really good ways of using multi-time frame analysis to decide on which indicator signals you’re going to filter out and which direction you’re going to overall trade.

So hopefully that gives you a good idea of some ways to experiment with moving average or with the indicators reversal alerts from higher time frames and you can pick the one that you think fits your trading style the best. and you can pick the one that you think fits your trading style the best.