You have to remember, a trend on a longer time frame has had more time to develop, which means that it will take a bigger market move for the pair to change course.
Start off by selecting your preferred time frame and then go up to the next higher time frame.
There you can make a strategic decision to go long or short based on whether the market is ranging or trending.
You would then return to your preferred time frame (or even lower!) to make tactical decisions about where to enter and exit (place stop and profit target).
Just so you know, this is probably one of the best uses of multiple time frame analysis…you can zoom in to help you find better entry and exit points.
By adding the dimension of time to your analysis, you can obtain an edge over the other tunnel vision traders who trade off on only one time frame.
There is obviously a limit to how many time frames you can study. You don’t want a screen full of charts telling you different things.
Use at least two, but not more than three time frames because adding more will just confuse the geewillikers out of you and you’ll suffer from analysis paralysis, then proceed to go crazy.
Is there a wrong way to do multiple time frame analysis, you ask?
Some of our forex friends have been nice enough to give their two cents on this matter through this forum thread on multiple time frame analysis.
At the end of the day, it really is all about finding what works best for you.
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