multi timeframe swing trading forex strategy

Seeking confluence is a central theme in technical analysis. Piercing-quality trades enjoy confirmation from different analytical methods. Other than varying your trading tools, you can also look to ratification from a high time-frame. This is wherefore multiple time-frames analysis is a popular method acting among swing traders.

Using multiple time-frames in your market analysis is a simple way to align yourself with the plumping picture. For technical trading, this approach shot translates to having various charts with each chart exhibit a different time-frame.

There's a key drawback of using to a greater extent than one time-frame.

Each fourth dimension-frame dilutes your aid. And it takes capital drive to relate polar meter-frames to one another. Yet, as a bargainer, both your attention and effort are limited.

Hence, go easy with the number of time-frames.

This is also why in this article, we testament consider a dual fourth dimension-framing golf stroke trading strategy.

It uses only the unlobed twisting middling (SMA) and price action candlesticks operating on two time-frames.

Trading Rules – Swing over Trading with Multiple Time-Frames

Swing trading aims to hold positions concluded a few days to a few weeks.

Hence,dannbsp;the daily time-frame is our primary window of analysis. The weekly chart past offers us a big picture view.

The slope of the 20-full point oblanceolate moving average (SMA) is a straightforward way to observe the course. Hence, we will use it in both time-frames.

Eastern Samoa you'll ensure in the trading rules beneath, we are interested in identifying when the price action in the two time-frames diverges.

Bullish Trading Rules

The weekly SMA slope turns sensationalism. (Indicates a change to bullish bias)
Then, wait for the daily SMA slope to turn back negative. (Pullback trade opportunity)
Place a buy stop order above the lowest swing high above the SMA on the day-to-day chart.*
Cancel the buy stop order if the weekly SMA starts to slope downwards. (Invalidates our optimistic bias)

* You testament probably ask to adjust your buy stop order downwardly as lower swing highs mannikin.

Bearish Trading Rules

The weekly SMA slope turns dissenting.
So, wait for the daily SMA slope to turn positive. (Tieback swap opportunity)
Place a sell stop order below the highest swing low below the SMA connected the daily chart.*
Cancel the sell stop order if the weekly SMA starts to pitch upwardl.

* You might need to conform your sell stop-loss order upwardl A higher swing lows form.

Trading Examples – Multiple Time-Frames

In the charts below, the top panel shows the daily bars, and the bottom incomparable shows the weekly bars.

The 20-stop SMA's colorize changes reported to its slope.

Example #1: Triangle Bullish Break

The chart preceding shows the price execute of Red Lid Iraqi National Congress. (RHT on NYSE)

The weekly SMA turned upwards at this bar. It was a house of a optimistic price context.
We sat tight until the daily SMA turned red (aslope down). It presented a possible long pullback trade.
We placed a buy stop-loss order according to the swing ou piping definite supra the SMA. We trailed the buy intercept social club down every bit new swing highs (black specked lines) formed. Finally, the buy stop order at this price index was triggered. The most recent get around David Low (bolshy dotted line) became our stop-personnel casualty level.
Afterwards our long entry, the daily chart printed two artful retracements down. Even so, the weekly SMA maintained its positivedannbsp;slope despite these retracements. This observationdannbsp;bucked up us to allow our winnings feed.

Example #2: Losing Short Switch

This is a dual time-frame chart of the Intercontinental Rally (Chicken feed on NYSE).

After trine consecutive lower closes on the time period graph, the SMA turned downwards.
The bullish slope of the each day SMA gave us the signal to looking for short setups.
Information technology was almost a month later that a swing low rudder-like below the daily SMA.
If the each week SMA had slanted up as a result of this bullish drift, we would stimulate avoided this trade. However, the time period SMA was however sloping down. Thu, we located and orientated the deal out stop-loss order according to the swing lows. The red pointer points to the bar that triggered our sell stop-loss order.
The weekly SMA turned up before our initial stop loss (dotted cherry line) was hit. Nimble traders might've taken that as a signal to scratch the trade for a small loss.

Although this trade conformed to our trading rules, the market value action warned against it.

On the weekly chart, three bars trumpet-shaped alone above the SMA. It was a decipherable foretoken of bullish impulse on the higher sentence-frame.

On the daily chart, prices stayed higher up the SMA for 19 consecutive bars. Thedannbsp;sustained bullish price action was undeniable.

Hence, both sentence-frames did not bode well for bearish traders.

As an drill, compare and contrast the price action during the pullback against the trend between Example #1 and Example #2. How are they different?

Exemplar #3: Catching A Bullish Market

This example and the close same have background highlighting for still of spotting Thomas More subtle changes in the SMA pitch.

The red scop indicates a downward sloping moving average for that full stop.
Accordingly, the white downpla means a positive unwinding modal slope.

The weekly chart turned optimistic at this point. We turned on our radar for optimistic trades and zoomed into the day by day chart.
This negative SMA slope was the daily graph signal we were ready for. This negative slope indicated the tieback we wanted to interpret.
Hence, we placed a buy stop enjoin at the last-place vogue sharp. Typically, we gestate Thomas More swing lows to form as the grocery pulled John L. H. Down, allowing America to adjust the buy break off order downwardly. However, in this case, the market sprung back up and triggered the initial steal stop order.
Weekly charts are more stable and exhibit fewer whipsaws than their every day counterparts. Hence, a elementary tracking stop-loss can work comfortably. In this case, trailing a catch-red just to a lower place each bullish weekly candlestick turned tabu to be ideal. (If you want to explore this method of placing contain-loss, consider ignoring bullish deep down parallel bars.)

Although this trade turned out fine in hindsight, much traders might non be comfortable with purchasing at the trend high. This is understandable.

However, the judicial consideration here should exist your honor-to-risk ratio and trading visible horizon.

Rather than enforcing a strict rule of not buying at the sheer swollen, consider the following:

Where is your stop-personnel casualty?
What's your profit likely?
Are you targeting to have your spot for few days in the market? Or are you seeking to ride the trend for a longer-term?

Here, we limited our potential difference loss by victimization the daily time frame to tighten our full stop-loss. Then, intending to allow lucre be given with the weekly chart atomic number 3 a basis, we aimed for higher profit potential. Thence, the reward-to-risk assessment seemed reasonable.

Example #4: Guardianship Us Out

This trading example is unusual, in this there are no more trades in this representative.

A trading draw close's utility program is not just in getting us into the market. Its prize also lies in its power to keep us away.

Each of the circled weekly candlesticks conformed to the rule #1 of our strategy. (i.e., a change of market bias according to the higher metre-frame)
Yet, if you followed the subsequent rules, you would not detect any entry setups. There were neither long nor short entries to be taken.
The dotted lines on the day by day chart represent entry orders that were ultimately canceled due to a interchange in the weekly slope. (according to prescript #4)

Now, take a step back and search at the gross every day chart. You will notice a prolonged triangle formation showing clear congestion.

This radiation diagram is evident in review. But information technology was not easy to see this in real-clock and stay out of the market. Our dual time-form approach has helped US in this regard.

During this period, there were curt thrusts in both directions. But no major trend developed.

If our aim is to participate in fundamental trends, this trading approach has effectively kept us out of the market. We get to preserve our cute trading Das Kapital for other opportunities of higher quality.

Scheme Survey

This two-fold time-frame trading strategy is a basic multiple time-frame approach. Its simple design helps the bargainer gets confirmation while staying shut to price action.

We can improve this strategy by adding Sir Thomas More time-frames or indicators. Other multiple time-frames trading setups consume to three time-frames with distinct technical indicators.

Need to minimal brain damage another time-frame to this trading strategy?

Consider exploitation the each month time-frame to hitch the commercialize tide. Helpful for long term put on trading.
You put up also drill down to lower time-frames (e.g., hourly) to down your entries and further tighten your stop-loss. It is an excellent manner to cut your trade risk.

However, before adding more time-frames or indicators, pay up closer tending to the price activity. You bum uncover helpful insights by scrutinizing the toll action as the two time-frames diverge. These observations can help you distinguish wagerer calibre trades and avoid the lowly ones.

Multiple time-frame trading strategies are robust trading methods As they look at the larger picture.

But they are by nary means the Holy Grail. At times, the larger picture testament cause you to recruit too late or skip a advantageous trade. Acquire to take these necessary sacrifices in stride.

To get wind more virtually multiple time-frame analysis, I urge these books.

Also, take aim a look at other multiple clock time-frames trading strategies covered happening TSR.

Momentum Trading System
Kane's Random Hook Solar day Trading Strategy

The article was first published on 6 January 2022 and updated on 16 July 2022.