Multiple Time Frame Analysis

Multiple timeframes analysis equals using 2 chart timeframes to trade stock indices - a shorter one used for trading & a longer one to check the Stock Indices trend.

Since it is always good to follow the market trend, in Multiple Time Frame Analysis, the longer time frame gives us the direction of the long-term trend.

If the long-term market direction supports the direction of the smaller chart time frame then the probability of being profitable is greatly increased. This is because even if you make a mistake the long-term stock indices trend will eventually save you. Also if you trade with direction of the market, then mostly you will be on the winning side, this is what this analysis is all about.

Remember there is a popular saying by many Stock Indices Trading and stock market investors that says: 'The stock indices trend is your friend' - never go against the stock index trading market.

There are four different types of Stock Indices traders - all these use different charts to trade as explained below.

Examples of how each type of Indices trader uses multiple Stock Indices Trading timeframes analysis strategy:

Scalpers

This group holds on to their trades for only a few minutes. The scalper never holds on to a trade for more than ten minutes. With the objective of making small amounts of pips as profit, 5 - 20 pips.

A Scalper using 1 minute chart wants to go long, checks 5 minute chart, which looks like the one below, since 5 minute show stock indices trend is going up, then decides from this analysis it is okay to buy.

Day Traders

This group holds on to their trades for a few hours but not more than a day. With the aim to make quite a number of pips, 30 - 100 pips.

Day trader trading 15 min chart wants to go long, checks 1 hour chart, which looks like the one below, since 1 hour shows market stock indices trend is going up, then decides from this analysis it is okay to buy

Swing Traders

This group holds on to their trades for a few days to a week. With the aim to make a large number of pips, 100 - 400 pips.

Swing trader using 1 hour chart wants to go short, checks 4 hour chart, which looks like the stock indices example illustrated below, since 4 hour shows the stock indices trend is going down, then decides from this analysis it is ok to sell.

Position traders

These are the traders that hold on to their trades for weeks or months. With the aim to make a large number of pips, 300 - 1000 pips.

Position trader using the daily trading chart wants to go short, checks the weekly chart, weekly looks like the one below, since weekly shows the stock indices trend is going down, then decides from this analysis it is ok to sell.

How to Define A Stock Indices Trading Trend

Using a stock indices system has 3 indicators - MA Crossover System, RSI and MACD and uses simple rules to define the trend. The rules are:

Upward trend

Both MAs Moving Up

RSI above 50

MACD Above Centerline

Downwards Stock Indices Trading Trend

Both MAs Moving Down

RSI below 50

MACD Below Centerline

For More explanation about this system read: How to Generate Signals with a Stock Indices System.