Looking At Multiple Timeframes

Looking at multiple timeframes can give you a better idea of what is happening with a currency. For swing trading, we can break this down into 4 time periods. The weekly, daily, 60 minute, and 5 minute timeframes.

The weekly chart

Birds Eye View - Think of the weekly chart as the timeframe that allows you to step back and get a look at the longer term trend. You can only fit so much data on the daily chart so it is hard to see what is really going on with a currency.

On the weekly chart, you want to see that the currency is in an uptrend and if there are any significant chart patterns. Many investors and institutional traders use this timeframe to make buy and sell decisions. So ask yourself, "If I were them, would I want to buy the currency now?"

The daily chart

The Charting Workspace - Swing Traders use the daily timeframe to make their buy and sell decisions. When we "run our scans", we are running them off of the daily chart. This is where we will find our trading opportunities.

However, we would still like to get an idea what the longer term trend looks like. This is where the weekly chart comes in.

The hourly chart

Binocular View - Think of the hourly chart like you were getting out of pair of binoculars and analyzing what is going on with the individual candles on the daily chart. When you "buy pullbacks" off the daily with consecutive lower highs (long positions), you will see that the currency is in a downtrend on the hourly chart.

Buying weakness and selling strength is the art of buying pullbacks. Stocks that are in up trends will pull back offering a low risk buying opportunity and stocks that are in downtrends will rally offering a low risk shorting opportunity.

You are looking for a break of that trendline in this timeframe.

When you say, "I'll buy when the currency trades over the previous high.", what you are really doing is buying that trendline break on the hourly chart. After that happens, then it is time for entry...

The 5 minute chart

Microscope View - This is where we will get our entry. So far, we have found a great setup on the daily chart. We checked the weekly for chart patterns and to make sure that the currency is in an uptrend. We zoomed in using the hourly chart and watched for a break of that trendline.

We have already made our decision that we are going to buy the currency.

The five minute timeframe is used to buy the currency at the best possible price. You really don't need to spend a whole lot of time analyzing this chart. Just look for the currency pull back to a support area (on the long side) to get your entry price. Simple.

Trading tips

• Each timeframe affects the other. A news event affects the intraday (5 minute) chart. This affects the hourly chart, which affects the daily chart, which affects the weekly chart.
• You may be able get a better entry with a tighter stop loss order using the hourly chart rather than the daily chart.
• Look for support and resistance, chart patterns, and candlestick patterns in all timeframes.
• Use the 200 SMA in all timeframes.

Analyzing different multiple timeframes can improve your success as a swing trader. However, you will rarely find a currency the looks absolutely perfect on the weekly, daily, and intraday charts. Your main goal is to identify support and resistance areas that could affect the currency in that timeframe.

The important thing to remember is to pick your main time period then look at a timeframe above it and a timeframe below it. The lower timeframe tells you what is happening now and the higher timeframe tells you what could happen in the future.