HOW TO USE MULTIPLE TIME FRAMES FOR TECHNICAL ANALYSIS

Technical analysis is a high income skill that must be learnt to be able to trade the financial markets successfully. Mindset is also critically important for trading but that’s a topic for another post altogether. To understand the full picture of what a particular asset is doing, it’s best to use multiple time frames for your technical analysis.

In this article I’ll explain which time frames I use and what I look for on each and why.

The Need for Multiple Time Frames

As a trend trader, my aim is to follow the long term trend and capture a chunk of profit in the middle of that trend. It’s unlikely I’ll get into a trend at its very beginning. Likewise I won’t exit my trade at the very top of the trend. Instead I enter once the trend is established and I exit using a trailing stop loss that follows price.

Just looking at my entry time frame will therefore not give me enough information to know what the bigger picture is doing. The daily time frame could be telling me to buy. However the monthly time frame of that same asset could be telling me to sell. With this in mind, using multiple time frames will give my trade setups full alignment. This will increase the probability of the trade going in my favor and realizing a profit.

Starting with the Monthly

My Technical analysis starts with the monthly time frame. I’ll usually know whether or not a chart is worth trading within 3 seconds of looking at the monthly time frame.

The monthly gives me the bigger picture of what that asset is doing.

• Is it trending?

• Is it consolidating?

• Has it trended well previously?

These questions can be quickly answered from the monthly with some experience.

Other factors I look at on the monthly time frame include:

• Long term support and resistance

• Where are the previous year’s high, low and close in relation to price (these levels can act as support and resistance)

• The linearity of any current trend

• The linearity and duration of any previous trends

• longer term chart patterns

Weekly Time Frame

As I move down to the weekly time frame, I focus in on more recent price action. The weekly gives me the following information:

• Rolling 52 week highs and lows in relation to price

• Medium term support and resistance

• Relative strength to the S&P 500 if analyzing stocks (I want to trade stocks that outperform the overall market)

• 200 moving average (if price is above we have a bullish bias, if below bearish)

• 50 moving average (if price is above we have a bullish trend, if below bearish)

• 20 moving average I use as a trend check (if price is continuously above the bullish trend is strong)

• Medium term chart patterns

Trade Entry Time Frame

The daily time frame gives me my trade setups. From the daily I analyze the following information:

• Local support and resistance

• 200 moving average (if price is above we have a bullish bias, if below bearish)

• 50 moving average (if price is above we have a bullish trend, if below bearish)

• 20 moving average I use to analyze the type of trend we’re in (depending on how price interacts with the 20sma, will depend on which entry type I’ll look for)

• Chart patterns and individual candlesticks for setups

• Volume for stocks

Technical Analysis Alignment

After analyzing each time frame individually, my technical analysis is brought together for alignment.

To give an example, we’ll look at moving averages. For a full risk and high probability long setup, I want price to be above the 200 and 50 moving averages on the weekly and daily time frames. This will give me a full bullish bias and trend without looking at the characteristics of price action itself.

In terms of support and resistance, for long trades I want minimal resistance above price across all 3 time frames. However if I have multiple support levels below price for long trades, this is a bonus. On the other hand, having daily support below price with the psychological figure $100 just above price gives me misalignment and a low probability trade. Reason being, is because although the daily support may be a positive, the $100 figure will likely cause some resistance and hinder price moving in your direction.

Overall, looking for full alignment between the monthly, weekly and daily time frame is what I look for, for the most probably trading opportunities. This is based on longer term trend trading. However if you’re a day trader multiple different intraday time frames may be more applicable.

If you want to do your own multiple time frame analysis, I would recommend TradingView as your charting software because they allow you to create professional looking multiple chart layouts for efficient technical analysis.

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Good trading…