First of all,
take a good look at what is happening on the market. Don’t
get closer, get further away. Remember, a trend on a longer time frame has more
time to develop, meaning it will take more effort to move the market for the
pair to change course.
Also, support and
resistance levels work more significantly on more extended time frames. Through
that, you can plan your decision to go long or short based on the ranging or
trending of the market. Then you can return to your preferred time frame, or
even lower, by placing stop and profit targets to make tactical decisions about
where to enter and exit.
You can zoom in
to get a better view of the entry and exit points. By putting in the dimension
of time to your analysis, you may get an edge over the tunnel vision traders,
who trade off in only one time frame.
Perform Multiple Time Frame Analysis
Let’s say you
like to trade with EUR/USD pair the most, and are comfortable at a 1-hour
chart. The first thing you do is move up to check the 4-hour chart of EUR/USD,
which will help to determine the overall trend. If the pair is in an uptrend,
this should signal to only look for BUY signals.
Now zoom back at
your preferred 1-hour time frame and spot her entry point. Here, you might see that
a doji candlestick has formed and the stochastic has crossed over, out of
oversold conditions!
To make sure you
get a good entry point, scale down to a 15-minute chart to find better entry
and confirmation. If the uptrend continues, you can confirm it’s a good time to
buy.
There is a limit
on the number of time frames you are allowed to study, you don’t want a screen
full of charts that tell you different things. It is recommended you use at
least two, but not more than three time frames.
At the end of the day, its all about what works
best for your style. Learn
more about both advanced and beginner forex trading at FBS
and become a successful trader!(Adv)
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