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How To Perform A Multiple Time Frame Analysis

Most traders pick their one time-frame and then almost never leave it. Or they just leave their time-frame to go down to lower time-frames to find more trading opportunities – which basically means they are recklessly hunting for signals on time-frames they shouldn’t be on.

The professional trader knows that the only way to approach trading is with the top-down approach and you’ll shortly see why.

 

Top-down vs. bottom-up – the biggest mistake of multiple time frame analysis

The biggest mistake traders make is that they typically start their analysis on the lowest of their time-frames and then work their way up to the higher time-frames.

wrong_way

Starting your analysis on your execution time-frame where you place your trades creates a very narrow and one-dimensional view and it misses the point of the multiple time frame analysis. Traders just adopt a specific market direction or opinion on their lower time-frames and are then just looking for ways to confirm their opinion. The top-down approach is a much more objective way of doing your analysis because you start with a broader view and then work your way down.

right_way

! Tip: Doing a multiple time frame analysis while you are in a trade can be a real challenge because of the trade-attachment. Once in a trade, the supposedly objective performance then turns into justifying your trade. Especially when you are in a losing trade, you have to be very aware of how you are doing your analysis; avoid justifying a (losing) trade based on the “bigger-picture” market view.

 

 

Multiple time frame analysis helps you stay open-minded

Obviously, the daily time-frame is less important if you are trading off the 1 hour time-frame. However, a trader who never leaves his execution time-frame has a very narrow view on the market and cannot put things into the right context.

Every trader, regardless of his main time-frame, should has to start his trading day looking at the higher time-frames to be able to put things into the right perspective. But looking is not enough because once you arrive at your lower time-frame and are in the midst of your trading session, you will have forgotten what you saw on the higher time-frames. There are two ways to deal with this problem:

1) Get a physical notepad

On your trading desk, place a physical notepad and for every market you trade, write down what you saw. We also offer a free trading plan template that can help you stay organized.

 

2) Annotate your charts

All charting platforms offer text objects and you can use them to directly write on your charts. It is also advisable to mark the areas on your chart that are your areas of interest. This way you are less likely to jump the gun and enter prematurely.

analysis_4H

 

Multiple time frame analysis – step by step

When it comes to actually performing your multiple time frame analysis, you don’t have to get too fancy. But knowing what to do and how to approach it can help you build a time effective routine that guides you through your trading sessions.

Multiple time frame analysis

Weekly / Monthly  – Where are we?

If you mainly use the 4 hour or 1 hour time-frame to execute your trades, you don’t have to spend too much time here. Basically, you just want to get a feeling for the overall market direction and if there are any major price levels ahead. Especially long-term support and resistance or weekly or annual highs and lows should be marked on your charts
analysis_weekly

 

Daily – Strategic time-frame

On the daily time-frame, you have to spend a bit more time on. Here you analyze the potential market direction for the week ahead and also determine potential trade areas. Again, draw your support and resistance lines and mark swing highs and lows – even if you don’t use them in your trading, it is worth having them on your charts because they are so commonly used.
analysis_daily

 

4H (1H) – Execution

Assuming that the 4 hour is your execution time-frame, this is where you map out your trades and specific trade scenarios. Take the levels and ideas you came up with on the daily time-frame and translate them into actionable trade scenarios on the 4 hour time-frame.

analysis_4H

Ask yourself where you would like to see price going, what has to happen before you enter a trade and what are the signals you are still missing.

 

Staying open minded – 2 tips

Always create long and short trade scenarios when doing your multiple time frame analysis. This will keep you open-minded and it avoids one-dimensional thinking. A trader who is only looking for short trades, will blank out all signals that point to a long trade. Or, a trader on a long trade will miss the signals that could signal a reversal.

Furthermore, separate your charting from your actual trading platform. If you can see your open orders on your screens during your analysis, you are much more likely to be biased during the analysis.

 

Here is a live example of a multi timeframe analysis:

 

 

Image credit: https://www.tradingview.com

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9 comments

  1. Great article; it is something that we all deal with when trading. It is real easy to confuse yourself while you are in a trade, but that is where time in the market and having a plan (any plan is better than no plan) comes in to play. Your last comment is also good – again it is easy to confuse yourself with a cluttered screen.

  2. I have over the last 7 years of trial and error come to multi time-frame analysis, partly based on the triple screen method taught by Dr. Elder. Your article has given me a few new concepts to try out, like keeping an open mind by looking for a long and a short position. Usually I’m just looking for position that fit with the longer term move using the shorter term time-frames for execution. I also have notebook I fill in daily with multiple pairs tracking from the monthly down to the hourly, it kind of acts as a route that gets my mind focused on follow my method and not jumping into trades based on a price shock event.

    I have found the material on your site to be some of the best online to date, great information, thank you.

  3. Great stuff on your site, very valuable information.
    I’m wondering why you limit your example to H4 or H1 timeframes for execution?
    Are these timeframes not already high for day trading?
    What are your thoughts about 5 and 15 minute timeframes, and which higher timeframes should be monitored when trading off these?

    Thanks for your extensive articles about risk, statistical info and the like.
    They’ll change the way I’ll be trading from now on!

    • Hello Wessel,
      thank you for your comment.
      I mainly write about the 4H, 1H and Daily timeframes because those are the ones who I use in my daily trading. I have written about it before, but I strongly believe that no timeframes is “better” than or “worse” than any other. It just comes down to execution and personal preferences.

      Rolf

  4. Thanks for a great sharing of knowledge and it really useful for newbie like me. Anyway, If I trade in Time frame. Is multi-time frame analysis will be Time frame Month – for Overviews ,Time frame Weekly for Strategic and Time frame Daily is for trade execute , is my right? And as it use time frame Daily for trade, the graph that use for trick to enter and/or exit the trade should be from TF4H, right? Appreciate for your suggestion. Thanks.

  5. virgil williams

    AReally great method thst csnnot be forgotten -rathr should not be forgotten
    virgil williams

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