Learn Forex – Multiple Timeframe Forex Trading
Learn Forex (FXpath.com) – One of the most logical, straightforward, and effective approaches to trading forex using technical analysis focuses on multiple chart timeframes. For example, a trader might begin by looking at a longer-term chart like the daily chart to determine the overall direction of the trend, if any. If a decisive long-term trend is in place, the trader should only trade in this direction, and stay out of trading any non-trending currency pairs.Then, the trader may drill down to a shorter timeframe like the 4-hour chart to look for recoveries of dips, or pullbacks, within the trend. These are counter-trend moves that provide an advantageous location to enter into the trend. For example, within a strong long-term uptrend, a minor downward retracement would represent a potential high-probability entry to get in on the uptrend at a good price.
Finally, the trader may drill down even further to an even shorter timeframe like the 30-minute chart, for example, to pinpoint and time exact entries. For example, if a bearish retracement is identified on the 4-hour chart within an overall uptrend on the daily chart, the trader could drill down to the 30-minute chart to wait for a resistance breakout in the direction of the trend, before finally entering into a long position.
What makes multiple timeframe technical analysis so powerful when trading the forex market is that it places traders on the right side of a market’s trend while also identifying optimal areas to enter into that trend and pinpointing the highest probability entry location.
James Chen, CTA, CMT (bio)
- Click here for my book, Essentials of Foreign Exchange Trading (Wiley).
- Click here for my book, Essentials of Technical Analysis for Financial Markets (Wiley).
- Click here for my video DVD set, High-Probability Trend Following in the Forex Market (FXstreet).
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Excellent article on multi-timeframe trading. Extremely helpful. I use a variation of this in my own trading. Keep up the great info!
All the best,
Chris S.