Syl Desaulniers - Amazon S3 · momentum trades • The less ideal the candle pattern the more...

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Syl Desaulniers Nison Certified Trainer™ Nison Candle Software Tech Support

Multiple Time Frames

• A well-founded means of reading charts and developing strategies providing an edge over the market – which includes candlesticks

• Who should use? – All traders: Day traders, momentum

traders, breakout traders, etc...

What is Multiple Time Frame Analysis

• Involves monitoring the same instrument across different frequencies (or time compressions).

• No real limit as to how many frequencies can be monitored or which specific ones to choose

• But, there are general guidelines that most practitioners will follow.

Multiple Time Frames

• Looking at a stock through different time frames can be confusing as a new trader. Why? – Because each time frame looks different!

– A stock may look great on the daily chart, but look horrible on a 5 minute chart.

• How many timeframes should a trader use? – Using three different periods gives a broad enough reading on

the market

– using fewer than this can result in a considerable loss of data

– while using more typically provides redundant analysis.

“Rule of Four”

• When choosing the three time frequencies, a simple strategy can be to follow a "rule of four.“

– Using short-term, intermediate and long-term time frames – Eg. : 15 min, 60 min, 240 min (4 hour)

• It’s imperative to select the correct time frame for all 3 periods….. – Long-term trader holding positions for months will find little use for a

15 min, 60 min and 240 min combination

– Day trader holding positions for hours find little advantage in Daily, Weekly and Monthly

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Long-Term Time Frame

• Generally the best policy to start with the long-term time frame and work down to the more granular frequencies.

• By looking at the long-term time frame, the dominant trend is established. It is best to remember the most overused adage in trading for this frequency

– "The trend is your friend."

Long-Term Time Frame

• Positions should not be executed on this wide angled chart, but the trades that are taken should be in the same direction as this frequency's trend is heading.

• This doesn't mean that trades can't be taken against the larger trend, but that those that are will likely have a lower probability of success and the profit target should be smaller than if it was heading in the direction of the overall trend.

Medium-Term Time Frame

• Smaller moves within the broader trend become visible

• Should be the most frequently followed chart when planning a trade while the trade is on and as the position nears either its profit target or stop loss.

– Eg. Choosing a trade from a Daily chart

– one would use Long-Term Weekly for confirmed trend, and Daily (Medium-Term to plan the trade)

Short-Term Time Frame

• Trades should be executed on the short-term time frame.

• A trader is better able to pick an attractive entry for a position whose direction has already been defined by the higher frequency charts.

• Less important if have East/West Confirmation

• Less important for momentum trades

• The less ideal the candle pattern the more important the candle confirmation

Using a move after the initial candle signal to validate signal

CANDLE CONFIRMATION

Trends

• To consistently make money in the markets, traders need to learn how to identify an underlying trend and trade around it accordingly.

– Common clichés include: "trade with the trend", "don't fight the tape" and "the trend is your friend".

• Common for traders to lock in on a specific time frame, ignoring the more powerful primary trend.

– Alternately, traders may be trading the primary trend but underestimating the importance of refining their entries in an ideal short-term time frame.

Time Frames

• A general rule: – The longer the time frame, the

more reliable the signals being given

– As you drill down in time frames, the charts become more polluted with false moves and noise

– Ideally, traders should use a longer time frame to define the primary trend of whatever they are trading.

Time Frames

• Once the underlying trend is defined, traders can use their preferred time frame to define the intermediate trend and a faster time frame to define the short-term trend

• Some examples of putting multiple time frames into use would be:

– Investor

– Swing Trader

– Day Trader

Trading Styles

• The selection of time frames to use is unique to each individual trader…..

• Ideally, traders will choose the main time frame they are interested in, and then choose a time frame above and below it to complement the main time frame.

– the long-term chart to define the trend

– the intermediate-term chart to provide the trading signal

– the short-term chart to refine the entry and exit

**One note of warning….

Do not get caught up in the noise of a short-term chart and over analyze a trade.

Investor (Long-Term)

• A long-term position trader could focus on weekly charts while using monthly charts to define the primary trend and daily charts to refine entries and exits.

• You want to see that the stock is in an uptrend and if there are any significant chart patterns.

– Many investors and institutional traders use this time frame to make buy and sell decisions.

Swing Trader

• A swing trader, who focuses on daily charts for his or her decisions, could use weekly charts to define the primary trend and 60-minute charts to define the short-term trend, and refining entry

• Spend most of your time on Daily

charts, running scans for Daily opportunities – Go back 5 to 7 months, or longer

• Looking for Support / Resistance

Day Trader

• A day trader could trade off of 15-minute charts, use 60-minute charts to define the primary trend and a five-minute chart to define the short-term trend.

3D Systems (DDD)

Long Term Trade

Silver Futures

Day Trade

Facebook (FB)

Swing Trade

Shutterstock (SSTK)

Swing Trade

Putting It All Together

• When combining all three time frames, a trader will easily improve the odds of success for a trade

• Performing the top-down analysis encourages trading with the larger trend

– This alone lowers risk as there is a higher probability that price

action will eventually continue on the longer trend.


• For example

– if the larger trend is to the upside but the medium- and short-term trends are heading lower, cautious shorts should be taken with reasonable profit targets and stops.

– Alternatively, a trader may wait until a bearish wave runs its course on the lower frequency charts and look to go long at a good level when the three time frames line up once again.

• Another clear benefit from incorporating multiple time frames into analyzing trades is the ability to identify support and resistance readings as well as strong entry and exit levels.


• A trade's chance of success improves when it is followed on a short-term chart because of the ability for a trader to avoid poor entry prices, ill-placed stops, and/or unreasonable targets.

Conclusions

• By taking the time to analyze multiple time frames, traders can greatly increase their odds for a successful trade.

• Reviewing longer term charts can help traders to confirm their hypotheses.

• By using narrower time frames, traders can also greatly improve on their entries and exits.

• Ultimately, the combination of multiple time frames with Candles allows traders to better understand the trend of what they are trading and instill confidence in their decisions.

Syl Desaulniers - Amazon S3 · momentum trades • The less ideal the candle pattern the more...

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