Multiple Time-frame Analysis

Hello Traders, here is a short article here for you about checking your set-ups on multiple time-frames. I know that many of you if you have a strategy that is built around a certain time-frame, do not have any interest any other time-frames than that of the one your set-ups are built on. However,  I would encourage you to analyze other times as well, and in this brief article, I am going to explain why it is important and show you a few examples of how not being diligent in my pre-trade analysis has hurt me in the past.

Why multiple time-frame analysis is so important:

  • Key levels of support and resistance may exist near your trade, but that can’t be seen on the time-frame you are trading on.
  • The trend may appear differently on the time-frame you are looking at than where the long-term trend is really moving.
  • Price may appear to have room to move on a one-time frame where it is actually quite over-extended on a lesser time-frame.
  • You can make a much more precise entry point on shorter times than on longer ones.
  • You may take a great trade in a short time-frame  and hit your target, but not realize you could have let it run for a way bigger profit due to the longer-term trend

So there are quite a few things that can  hurt you as a result of not looking thoroughly at multiple time-frames, but in this article, I am going to focus on two of them:

– The trend being against you in a longer time-frame

-Price being over-extended on a shorter time-frame

1st. Many times, I will be trading my Bollinger Band Strategy on the 4hr or 1hr chart. I will have a very nice set-up and take the entry based on my criteria; however, I may forget to analyze the daily and weekly (often because I am excited to see my set-up and cannot contain myself enough to be patient) and find that it is very counter-trend even though on the 4hr or 1hr it looked like a pretty decent channel.

Let me show you a trade that hurt me quite a bit due to lack of Multiple time-frame analysis (click to enlarge):

time frameSo on to the 4hr where I made my entry, the trade looked perfect. It was a choppy-looking market with a lot of downward movement. Nothing on the 4hr made me believe that this trade wouldn’t work out great, but obviously, it was a loser. Now, if I would have looked at the daily chart, I would have seen that I was actually making my short entry in a very strong uptrend and therefore should not have made that entry. Let me show you what the daily looked like during that entry:

Okay, so now we see that this was a horrible trade. I had no business taking a short position where I did on that daily chart, but because I didn’t take the time to do full analysis prior to making my entry, you can see that I lost money. This is a prime example of the trend being against you when you don’t realize it. You must watch for that–ALWAYS look for the longer trend when you are making an entry.


The next example I want to go over is when price appears to have room, but is actually quite ready to reverse on a smaller time-frame. In this example, you may not actually lose the trade because the longer term entry is on your side, however, it may put you in a bad situation where your behind in the trade 15 or 20 pips very early in the trade.

So here is another Bollinger trade that I took, but didn’t pay close attention to the smaller time-frame.

So, here we see my entry, which matches my criteria perfectly, but I get a rather large retracement almost immediately after I enter. The reason this happened is simple: although price had plenty of room to move on the 4 hr, it was over-extended on the hour and therefore had to bounce up in for “breathing room” before it could continue downward. Here is that hourly chart:

Okay, so you can see from this chart that where I took my entry was in a place where a price was over-extended on the shorter time-frame. If I would have seen that before the entry I could have waited for the hourly retrace and made my entry at a MUCH better price. Note that when a price is over-extended it does NOT always bounce up; however, is it way too big of a chance to take when you’re trading.

I hope this helped you better understand why multiple time-frame analysis is so important and how it can help you gain extra pips and save yourself from losing them.

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