Why do we have to trade with more than one timeframe?
To improve how well our trading plan works. We see that the major trend is using a higher time frame than we plan to use and a lower time frame to enter a trade.
Let's say we want to use the Daily Charts to trade. We look at the Weekly charts to find out what the big trend is. Let's say that a Weekly chart shows an upward trend. Most of the time, we will only trade long positions. We will only enter long positions through the daily charts. When there are signs to sell, we'll just get out of our long positions. That is, we don't sell short.
Let's say that a Weekly chart shows a downtrend. Most of the time, we will only trade short positions. We will only use an entries on the daily charts to go short. When signals to buy come in, we'll just get out of our short positions. In other words, we don't take long positions.
Since we're using two time periods. Now, let's talk about when to make trades or add more positions. (Pyramiding) We can also time our entries with an Hourly chart. Let's say that the weekly and daily charts are both going up. When a buy signal appears on an hourly chart, we will open a long position or add to an existing long position. Let's say that both the weekly and daily charts are going down. When an hourly chart tells us to sell, we will open a short position or add another short position. This timeframe wouldn't be used to get out of the trades. It's only to speed up the process of getting in. We would use the signals from the daily charts to know when to get out of a trade.
Using more than one time frame to trade.
Three charts of the same security are used. First is the chart for one week. The daily chart comes next. The hourly chart is the third one.
We will now trade using the daily chart. We look at the weekly chart to see what the week's trend is. Don't assume that the trend for the week is up. So, based on this information, we will only trade long positions on the daily chart.
To go long, we can look at the daily chart for a chance to buy, or we can look at the hourly chart.
Now, we use buy opportunities on the hourly chart to add more positions. We would only leave based on the daily chart because that was how we traded.
In the same way, we can trade short when the weekly chart is in a downtrend and the daily chart shows a chance to sell. When selling opportunities show up on the hourly charts, more positions are opened.
We can use the hourly, 15-minute, and 5-minute charts for day trading. Here, we use the 15-minute chart. Or, we can use charts for 15, 5, and 3 minutes. Here, we use the 5-minute chart.
Good luck, and I hope you do well.
