Multiple Time-Frame Analysis - Forex Multiple Chart Timeframe Analysis

Multiple time frames analysis in forex trading equals using 2 chart time-frames to trade forex currencies - a shorter chart timeframe is used for trading & a longer chart timeframe is used to check the trend direction.

Since it is always good to follow the trend, in Multiple Time-Frame Analysis, the longer chart time-frame gives us the direction of the long-term trend.

If the long term market trend direction supports the direction of the smaller chart time frame then the probability of being profitable is greatly increased. This is because even if you make a mistake when opening your trade the long term trend will eventually save you. Also if you trade with the direction of market trend, then mostly likely you will be on the winning side, this is what this multiple chart timeframe analysis is all about.

Remember there is a popular saying by many Forex and stock market investors that says: "The trend is your friend' - never go against the market trend.

There are four different types of traders - all these different types of traders use different charts to trade as explained below.

Examples of how each type of trader uses multiple Time-Frames analysis strategy:

Scalpers

This group of traders holds on to their trades for only a few minutes. The scalper never holds on to a trading for more than 10 minutes. With the objective of making a small amount of pips as profit, 5 - 20 pips.

A Scalper using 1 min chart wants to go long, checks 5 min chart, which looks like the one below, since 5 min show trend is moving up, the scalper then decides from this multiple timeframe analysis it's okay to buy.

Day Traders

This group of traders holds on to their trades for a few hours but not more than a day. With the objective to make quite a number of pips, 30 - 100 pips.

Day trader trading 15 min chart wants to go long, checks 1 hour chart, which looks like the one below, since 1 hour shows the market trend is moving up, the day trader then decides from this multiple chart timeframe analysis it's okay to buy

Swing Traders

This group of traders holds on to their trades for a few days to a week. With the aim to make a big number of pips, 100 - 400 pips.

Swing trader using 1 H chart wants to go short, checks 4 hour chart, which looks like the example below, since 4 hour chart shows the market trend is moving down, the swing trader then decides from this multiple timeframe chart analysis it's okay to sell.

Position traders

These group of traders are the investors that hold on to their trades for weeks or months. With the aim to make a big number of pips, 300 - 1000 pips.

Position trader using the daily chart wants to short, checks the weekly chart, weekly chart looks like the one below, since weekly chart shows the trend is going downwards, the position trader then decides from this multiple timeframe analysis it's okay to sell.

How to Define a Trend - How to Define a Trend Using a Strategy

A trader can use a system that has Three indicators - MA Crossover System, RSI and MACD indicator and use simple rules for these indicator to define the trend. The rules of the trading system used to define a trend are:

Upwards Trend

Both MAs Moving Up

RSI above 50

MACD Above Center-Line

Down-wards Trend

Both MAs Moving Down

RSI below 50

MACD Below Centerline

For More explanation about this trading system read: How to Generate Trade Signals With a Forex System Tutorial Discussed.