Utilizing Forex Multiple Time Frames Strategy

Utilizing Forex Multiple Time Frames Strategy

Submitted by adil on Tue, 12/30/2014 - 07:49

When it comes to making a business survive and become successful in the long run, it is imperative that the investor knows the history of the market. The more lengthy history the investor knows, the better is he or she able to forecast the attitude and behavior of the members of the market over time.

In Forex trading also, knowing about a particular trend in previous time frames is an effective way of predicting about how it is going to behave in the future, thus affecting the trading strategy of a trader. The lines below discuss the benefit of Multiple Time frames strategy in Forex Trading.

Multiple Time Frames:

As the name indicates, this type of trading strategy deals with following a particular currency pair over different time frames. The analysis of the temporary trends can better be done if a trader analyses the trend over a longer period of time or under different time frames.

Analyzing a particular trend in a single time frame might not give the bigger picture to the trader which is required for making greater and riskier trades. Thus, the analysis of a trend in multiple timeframes allows the trader to see that how the trend has behaved in different market situations. Ergo, multiple time frames are essential to making appropriate decisions.

Reading a Time Frame Chart:

It is upon the investor to select whatever time frame he or she wishes to analyze. When multiple time frames are considered, it is imperative that the investor knows the right way of reading the charts so that the comparison and contrast could become easy.

• In a time frame chart of one month, there are 360 candlesticks in which every candlestick is a representative of about two hours. Thus, without knowing the time duration for which the candlestick stands for, it is difficult to analyze the trend properly.
• The purple markings on the left side of the chart show the mini-trends. With the help of these markings a trader can see the small trends within a short timeframe, thus allowing the trader to make decisions for shorter trades.
• The mini-trends are not solely to be relied upon in order to find the overall trend, rather a bigger time frame needs to be considered for knowing and understanding the overall behavior of a particular trend.
• For a timeframe of six months, every candlestick in the timeframe chart becomes a representative of one day and thus by knowing this measure a trader can see the behavior in the trend over the period of six months.
• Similarly, when it comes to yearly time frames an even greater picture is available and the candlesticks in this timeframe stand for more than a day.

Considerations:

A few considerations pertaining to understanding a multiple time frame chart are:

• Firstly, the standard time frames that require greater focus are the ones that lie in the middle of the whole timeframe, where the candlesticks present an hour, half an hour and fifteen minutes. The knowledge of this area of a timeframe chart is sufficient in helping the trader make a decision regarding the trade.
• Secondly, when considering a shorter time frame a trader must remember that the analysis of this time frame should not be used to make long term trade decisions, rather it is for the short term.

Conclusion:

In short, it is imperative that a trader considers multiple timeframes when making a decision regarding a trend. A trend that might seem bullish in a short time frame might turn bearish in the long timeframe. Therefore, considering multiple timeframes is necessary.