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  • Writer's pictureVasily Trader

Learn THE IMPORTANCE of Multiple Time Frame Analysis

Updated: Dec 26, 2023

multiple time frame analysis in trading

In my daily posts, I quite frequently use multiple time frame analysis.

If you want to enhance your predictions and make more accurate decisions, this is the technique you need to master.

In the today's post, we will discuss the crucial importance of multiple time frames analysis in trading the financial markets.

1️⃣ Trading on a single time frame, you may miss the important key levels that can be recognized on other time frames.

how to analyze multiple time frame

Take a look at the chart above. Analyzing a daily time frame, we can spot a confirmed bullish breakout of a key daily resistance.

That looks like a perfect buying opportunity.

However, a weekly time frame analysis changes the entire picture, just a little bit above the daily resistance, there is a solid weekly resistance.

From such a perspective, buying GBPUSD looks very risky.

2️⃣ The market trend on higher and lower time frames can be absolutely different.

how to use top-down analysis

In the example above, Gold is trading in a bullish trend on a 4h time frame.

It may appear for a newbie trader that buyers are dominating on the market. While a daily time frame analysis shows a completely different picture: the trend on a daily is bearish, and a bullish movement on a 4H is simply a local correctional move.

3️⃣ It may appear that the market has a big growth potential on one time frame while being heavily over-extended on other time frames.

top down analysis example

Take a look at GBPJPY: on a weekly time frame, the market is trading in a strong bullish trend.

Checking a daily time frame, however, we can see that the bullish momentum is weakening: the double top pattern is formed and the market is consolidating.

The sentiment is even changing to a bearish once we analyze a 4H time frame. We can spot a rising wedge pattern there and its support breakout - very bearish signal.

4️⃣ Higher time frame analysis may help you to set a safe stop loss.

how to trade multiple time frames

In the picture above, you can see that stop loss placement above a key daily resistance could help you to avoid stop hunting shorting the Dollar Index.

Analyzing the market solely on 1H time frame, stop loss would have been placed lower and the position would have closed in a loss.

Always check multiple time frame when you analyze the market.

It is highly recommendable to apply the combination of at least 2 time frames to make your trading safer and more accurate.

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