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

Legal Notice: This webcast and recording is © Candlecharts.com and may not be copied, retransmitted, nor distributed in

any manner whatsoever, including, but not limited to, video or audio file sharing sites, online auction and classified sites,

discussion forums nor any other means. Illegal redistribution of this content may result in criminal and/or civil fines,

pursuant to applicable international copyright law. All rights reserved worldwide.

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.

© Steve Nison’s Candlecharts.com

“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

www.candlecharts.com/free-education

www.candlecharts.com/free-education

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.

www.candlecharts.com/free-education

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)

www.candlecharts.com/free-education

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

www.candlecharts.com/free-education

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

www.candlecharts.com/free-education

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.

www.candlecharts.com/free-education

3D Systems (DDD)

Long Term Trade

3D Systems (DDD)

Long Term Trade

3D Systems (DDD)

Long Term Trade

Silver Futures

Day Trade

Silver Futures

Day Trade

Silver Futures

Day Trade

Silver Futures

Day Trade

Facebook (FB)

Swing Trade

Facebook (FB)

Swing Trade

Facebook (FB)

Swing Trade

Facebook (FB)

Swing Trade

Shutterstock (SSTK)

Swing Trade

Shutterstock (SSTK)

Swing Trade

Shutterstock (SSTK)

Swing Trade

Shutterstock (SSTK)

Swing Trade

www.candlecharts.com/free-education

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.

Putting It All Together

• 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.

Putting It All Together

• 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.

www.candlecharts.com/free-education

www.candlecharts.com/free-education

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.