Multiple Time Frame Analysis.
The process of looking at the same pair and price on several time frames is known as multiple time frame analysis.
Remember that a pair occurs on multiple time scales: daily, hourly, 15-minute, and even 1-minute!
When you utilize a chart, you will see that multiple time frames are provided.
The graphic above is for the “1 day” or daily time range.
When you click on “1 hour,” the 1-hour chart will appear. If you click on “5 minutes,” the 5-minute chart will appear, and so on.
There’s a reason chart apps provide so many time frames. Because there are several market participants in the industry.
This means that various forex traders can have opposing views on how a pair is trading and both can be correct.
Some traders will concentrate on 10-minute charts, while others will concentrate on weekly charts.
On the 4-hour chart, John may notice that the EUR/USD is in a downtrend.
Jane, on the other hand, trades on the 5-minute chart and notices that the pair is simply ranging up and down. And they both could be correct!
As you can see, this is problematic.
When traders look at the 4-hour chart and get a sell signal, they switch to the 1-hour chart and find prices slowly rising.
So, what should you do?
A. Concentrate on one-time frame, take the signal, and disregard the other time frame?
B. Toss a coin to see if you should purchase or sell?
Both possibilities are horrible.
So, what are the advantages of considering multiple time frames?
- They give you different perspectives and views of a currency pair.
- They enable you to spot upcoming support or resistance areas.
- They enable you to spot trend changes earlier.
- They help you to enter or exit a trade as early as possible.
- They help to confirm the trend change in a higher time frame.
- They allow you to know what other market participants are thinking.
- They enable you to see the small picture, medium picture, and the big picture.
First, we’ll try to assist you in determining the time span you should concentrate on.
Each forex trader should use a time period that is appropriate for his or her personality (more on this later).
Second, we’ll show you how to use different time frames of the same currency pair to make better, more informed trading decisions.