The Simple Way of Trading Multiple Time Frames in Forex

Finding the right time frame for your trading is not an easy task.

A Forex trader faces a wide variety of choices when the trading career is started… and choosing the chart type and time frame configuration is one of them.

Traders have choices

How to tackle it and what things should be considered?

First of all, the time frame choice is connected to your trading style. Here is a list to provide an essential idea:

  1. In case of a position trader - use higher time frames like a weekly chart
  2. In case of a swing trader - use intermediate time frames like a 4 hour chart
  3. In case of an intra-day trader - use lower time frames like a 15 minute chart

This is a simplified approach and we advise to tackle the market in a smarter way – more on that down below.

One more important message: there are many other essential choices (besides time frames) that need to be made before you start risking your trading capital.  Of course the Double Trend Trap method is always available if you want to make your trading simple.

MULTIPLE TIME FRAME (MTF) ANALYSIS

Winners Edge Trading advises traders to use multiple time frame analysis.

Why?

It offers the opportunity for traders to understand the market structure in a much deeper and profound way than any single time frame analysis can do.

Single time frame:

Simple chart

Multiple time frame:

Multi-view

It offers the chance for traders to read what the big money is doing; instead of trying to follow someone on TV.

It offers the possibility for traders to improve and enhance their strategy’s performance via better entries, exits, trade management, money management, etc.

Let’s compare this with a single time frame strategy… the single one offers a very limited view on the market and leaves traders often confused as to why their setup is failing.

Without doubt we recommend multiple time frame (MTF) analysis… but using MTF can have the drawback that it can cause confusion for traders when they start out.

MTF’S SECRET MIX

That is where our TOFTEM model steps in. (if you are scratching your head now, do not worry and check out this link for more information).

It allows traders to use multiple time frame analysis in a simple step by step fashion.

Traders in fact hardly realize they are implementing MTF because it is engrained in the strategy.

Trading MTF becomes a natural flow with the TOFTEM model.

This IS your “secret weapon” – use it wisely!

secret weapon

Result: our analysis and trading process becomes simple – also with multiple time frame analysis.

Now traders can have the benefits of both worlds:

  1. The simplicity of a single time frame approach;
  2. Combined with the in-depth understanding of market structure via multiple time frames.

Wow! You gotta love trading, don’t you? :)

The DTT strategy uses the TOFTEM model for its approach as well. Although the DTT is certainly not the only configuration possible, it does make the steps simple for you, the Forex trader.

MULTIPLE TIME FRAMES AND TOFTEM

Multiple time frame (MTF) analysis offers traders the variety needed to implement the TOFTEM model.

Before we embark on this journey, let us explain what degrees of time frames we use and what the TOFTEM stands for.

Winners Edge Trading uses 5 primary degrees of time frames. Irrespective of the time frames a trader chooses, its best to maximize the number of degrees to 5. The time frames we use for this article are:

  • Weekly, daily, 4 hour, 1 hour, 15 min;
  • Some traders use the 8 hour and/or 2 hour charts instead of the daily, 4 hour, and/or 1 hour, which is perfectly fine.

TOFTEM stands for:

  1. Trend
  2. Opportunity
  3. Filters
  4. Trigger
  5. Entry Method

The TOFTEM and MTF are step by step explained here below:

STEP 1 TREND:

  1. The recommended trend time frames are the 4 hour, 8hour and/or daily chart because they provide sufficient overview of the past price action in the market. Traders can adequately judge whether a market is trending, reversing, or ranging.
  2. If a trader is trading long-term positions, then the weekly chart is optimal.
  3. If a trader is trading very short-term positions, then a 1 hour or 2 hour could be better.

The beauty of our DTT trend indicators is that it automatically shows what the trend is on the 4 hour and daily chart – no matter what time frame you are actually looking at! This keeps your trading simple and consistent throughout time.

If the market matches what your strategy is looking for, then you can move on to the next step which is opportunity. (If not, then move on to the next currency pair)

STEP 2 OPPORTUNITY:

Winners Edge Trading recommends to check whether there is an opportunity on 1 and / or 2 time frames lower than the trend chart. This provides the possibility for traders to zoom in and look for trade setups in the direction of their step 1.

Filters

STEP 3 FILTERS:

Winners Edge Trading recommends to check whether there is a filter on 1 (and/or 2 time) frame(s) higher than the trend chart. This allows traders to check whether any major support or resistance levels (and/or other chart elements) could be blocking a potential trade setup from materializing.

The currency pairs that remain interesting after review via these 3 steps, can be placed on a “watch list” which are trade setups which are getting close to execution.

STEP 4 TRIGGER:

Now that the potential trade setup is close, Winners Edge Trading recommends to check for triggers on the on 2 (and/or 3 time) frame(s) lower than the trend chart. The trigger chart should be closer to price action than Step 1 Trend and Step 2 Opportunity as it keeps in sync with the market rhythm.

STEP 5 ENTRY METHOD:

The time frame for the entry can actually be quit diverse. It can be the same as the trigger chart, or even again 1 time frame lower. It could also be the same time frame as the Step 2 Opportunity chart.

For the DTT traders all of the above is well-known, but for others this approach is new, or almost new.

How do YOU view multiple frame analysis? Do you trade better with it? What advantages are the most important to your trading while using MTF?

Please tell us how your time frame approach differs from above?

Thanks for taking the time to read this article and hope you will share it with others as well.

Wish you Happy Trading!

 

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Chris is the head of the mentoring program and trading room at Winner's Edge Trading. He has a passion for technical analysis and helping Forex traders achieve their goals in trading. Chris has been trading for almost 10 years and is most fond of the Double Trend Trap (as a strategy), moving averages (as an indicator) and Fibonacci (as a tool).

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  • Chris

    Hi Peter, thanks! Glad you liked the article. Time frames will certainly vary from trader to trader but by organizing the steps together with time frames, the process becomes more clear. Thanks and have a great day!

  • Peter L

    Hi Chris,
    Thanks for your comment. I think it is too general….. good article.

  • Chris

    Hi Peter L, excellent question. It is good to clarify this point indeed. Thanks for your chat.

    Because the article is discussing time frames in general, I did not want to necessarily exclude a trader that takes entries on a higher time frame. Traders who use 4 H for entries however would probably be using the 4 H for a trigger chart though. In some cases traders, after a trigger has been hit, actually zoom out to see the bigger picture and place a trader at a certain retracement spot. Not probably something that occurs very often; yet a practice that does make sense. Let’s take an example of the DTT:

    1) TREND: DAILY and 4 HOUR
    2) OPP: 1 HOUR
    3) FILTER: DAILY and WEEKLY
    4) TRIGGER: 15 MIN and 1 HOUR
    5) ENTRY: 15 MIN and 1 HOUR

    Step 5 can be equal to step 2 time frame. There are various time frame combinations, the ones mentioned above seems to be the best where filter is above trend, trend above opps/trigger/eo.

    Hope that helps!

  • Peter L

    Hi Chris,
    That is the great article, but it is not clear for me on step 5 entry method e.g. using the 4H as the opportunity chart, the entries could be the trigger chart on 15M or 5M (1 time frame lower ) or 4H ( the opportunity chart ). Are we trading on 4H chart based your above multiple time frame charts ?
    Secondly, please comment on the intra day trader using 15 M chart. Thanks.