Traders use multi time frame analysis to give them an edge on short term and long term traders. This is because using a mix of time frames can show you areas in the market that provide resistance, support, or expected moves. There is no reason every trader doesn’t keep multi time frame analysis as one of their key tools in trading. It takes the bigger, more influential, picture of the maket, and applies this to the shorter time frames. You end up with the best of both worlds.
This video shows you how and therefore why you can and should use multi time frame analysis
Why is the higher time frame dominant?
Traders entering in on an hourly chart do not care what is happening on the 1 minute charts. They are looking at the larger picture of the market. If you are dealing with a level of support and resistance on a 5 minute chart, that level is not even on the hourly chart trader’s mind. He is thinking about the bigger resistance and support levels created by the last turn around in the market on the hourly, 240, and daily charts. The highs and lows of the previous day are more important to him than what is happening on the 5 minute charts. As a short time frame trader, you analyze the hourly charts to trade around the important price levels. This is the essence of multi time frame analysis. You are using the big lot, high time frame traders to your advantage in the short term charts.
How to Apply Multi time frame analysis?
In the image above, you can see a simple analysis of highs and lows, combined with trend lines, outlines areas to watch for in lower time frames.
You are using the same skills from the short term charts applied quickly to the long term charts. You do a quick analysis of key levels of support and resistance in the market on a higher time frame, and then keep those levels marked off in your lower time frame to trade. When the market approaches these levels, trade assuming they are important S&R levels in the market. This alone give you an edge in trading because you have a broader view than the short time frame that you trade.
Bruce Banks