different time frames

Discussion in 'Technical Analysis' started by mcteague, Sep 12, 2012.

  1. mcteague


    Like many novice traders, I am often distressed when the chart and indicators show completely different things depending on the time frame use. How do experienced traders resolve that? When for example there is a strong bearish trend in the daily, but your 10min says oversold.
  3. BSAM


    Why not use the time frame which gives you the most consistent positive results?

    Why not drop "indicators" and learn to read price action/volume?
  4. Oversold is a condition that can persist for a long time in a strong bear trend on any or all time frames. A 10-min chart can bounce between overbought and oversold when the daily is trending down, or it can stay oversold for an entire day within the daily downtrend (or daily uptrend, for that matter).
  5. dom993


    I'd say experienced traders know trading is a statistical game.

    Whatever you use, there will be losing trades, and there will be missed winning trades. Get used to it.

    You need to find a trading method with a statistical edge that you verified on hundreds of setups on historical data. Once you have that method with a verified edge, take all setups according to the method, no more, no less.
  6. This happens a lot of course. Ideally you wait for the different timeframes to line up. I'll explain this with a MACD example.

    But first a recommendation regarding multiple TF's:
    If you use a (smaller) TF to take your entry signal from, and a (larger) TF to determine the trend - try using a factor of x3, x4 or x5. So as an example: Use the 15min inside the hourly chart, the 5min inside the 15 or 30min, and the 1min inside the 5min. The point I'm trying to make is that going from 10min to daily is a jump that is too big imo.

    Attached is the MACD of the eurusd forex pair on a daily chart and a 4 hour chart. The euro is going up for around 1,5 months now. And you can see that the MACD made an upwards cross on the daily graph.
    Now if you want to jump into this uptrend by means of the 4 hour chart, you just have to wait until it does exactly the same thing = making an upwards cross. These spots are indicated with the green arrows on the 4H chart.
    It happen to be also very large green candles in this example. If you want the confirmation of the cross, you have to wait for the bars to close. This will result in a rather large stop since it are relatively long green bars on the 4H chart. Alternatively, you can enter more agressively since both cases were breakouts of a previous inside bar. This would allow for a smaller stop. (but that's just a PA thingy and not the topic of your question)

    If both are showing different things - daily up and 4H going down (as it is on the left side of the 4H graph) then there are a couple of options:
    - You want to trade the bigger TF trend, so you just wait until you get your entry signal on the smaller TF to get into the bigger TF trend. You wait until both line up.
    - You go short but you know that it is a countertrend trade. You don't expect it to run very far and you remain cautious to grab that entry with the trend.

    Later as you get more experienced with this you can use even more TF's and see even more trends on all the different layers. This is not limited to just MACD as the concept works for many indicators.

  7. Eight


    99.9% of indications are actually random. What diff does the timeframe make if the indications are random?
  8. oraclewizard77

    oraclewizard77 Moderator

    I would suggest using a time frame depending on how long you want to be in the trade. If you are going to be in a trade for days, you want a different time frame then if you are going to be in a trade for minutes.
  9. oraclewizard77

    oraclewizard77 Moderator

    Actually, when you find the .1 % indicator that is reliable, then the time frame you use it becomes extremely important.

  10. cornix


    Just wait when your TF's of choice agree with each other. This is called context and is a very powerful tool.
    #10     Sep 13, 2012