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1
Why use multiple time frames?
2
How to choose multiple time frames?
3
How to confirm chart patterns with multiple time frames?
4
What are some tips and pitfalls to avoid?
5
How to practice and improve your skills?
6
Here’s what else to consider
Chart patterns are visual representations of the collective psychology of traders and investors. They can help you identify potential entry and exit points, as well as the direction and strength of the trend. However, chart patterns can also be misleading or invalid if they are not confirmed by other indicators or time frames. In this article, you will learn how to use multiple time frames to confirm chart patterns and improve your technical analysis skills.
Key takeaways from this article
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Harmonize time frames:
Start with a higher time frame to grasp the overall trend and then drill down to shorter ones for precise entries and exits. This ensures consistency in your analysis and enhances trading decisions.
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Avoid over-optimization:
Don't get hung up on finding the perfect ratio between time frames. Use longer ones for a broad view and shorter for details. Simplicity can lead to effective, less confusing strategies.
This summary is powered by AI and these experts
- Amit Kumar Shukla Experienced Investor and Technical…
- Peter Kostovcik Investment Discord - unique trading…
1 Why use multiple time frames?
Using multiple time frames means analyzing the same asset or market on different time intervals, such as daily, hourly, or 15-minute charts. This can help you gain a broader perspective of the market structure, the dominant trend, and the key support and resistance levels. It can also help you filter out the noise and false signals that may occur on lower time frames. By using multiple time frames, you can increase your confidence and accuracy in identifying and trading chart patterns.
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- Vishnu D R Top Technical Analysis Voice | Options Trader | Investment Banking Consultant
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In conitnuation to this explantaion, there are 2 broad approaches while using multi-timeframe analysis - Top Down approach and Bottom Up approach, each of them serving different purpose. Top down is moving from higher timeframe to lower timaframe. So, by analyzing daily charts and identifying key supports and resistances, one can apply them to intraday trading using 15 mins charts for entry and exit. Bottom up approach is better by looking in the following order as daily, weekly and then monthly charts. Generally helps in decision making of positional trade based on broader trend. Eg: A trader sees bullish engulfing in daily chart but on monthly chart is in bearish trend, then the trader can avoid such a trade or have smaller targets.
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Time Frames analysis is the key.To get the bigger picture of price action, think of it as mother Earth.Start with the Satellite view(Monthly and weekly time frames), then come down to Aerial view(Daily candle and 2&3Day candles), then Overhead view(Hourly candles) and then narrow it down to Microscopic view(Short term candles, minutes).It will help to get very specific entry and exit.
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The use of multiple time frames is to enhance and increase the probability of a trade outcome. Where the analysis is done on a time frame it gives a level of information, when analyze on another time frame, more insights and clarity is achievable to aid an informed and strategic decision.
Like Like Celebrate Support Love Insightful Funny 2 - Amit Kumar Shukla Experienced Investor and Technical Analyst | CMT Level 2 Candidate | Financial Markets Professional | Trainer
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Using multiple time frames to confirm chart patterns is a prudent strategy for traders & investors seeking more comprehensive & reliable analysis.It increases confidence in pattern recognition, provides stronger confirmation & reduces risk of responding to false signals. This approach serves as a robust filter & helps distinguish real opportunities from noise.Longer time frames reveals broader market trend, ensuring alignment with prevailing market sentiment. Shorter time frames then provide precise entry & exit points within trend, optimizing risk/reward ratio.Further, traders can set well-placed stop loss levels & identify critical support / resistance zones. This comprehensive view promotes more effective risk management.
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Choosing time frame depends on the type of trader you are. It is good to have a broader view of the currency pair or asset you are trading. Analyzing higher time frame and coming down to the one you trade, will help you make better decision.
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2 How to choose multiple time frames?
There is no definitive rule on how to choose multiple time frames, but a common approach is to use a ratio of 4:1 or 6:1 between the higher and lower time frames. For example, if you are trading on a 30-minute chart, you can use a 2-hour chart as your higher time frame, and a 5-minute chart as your lower time frame. The higher time frame can help you determine the overall trend and the major chart patterns, while the lower time frame can help you fine-tune your entry and exit points and the minor chart patterns.
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- Peter Kostovcik Investment Discord - unique trading tools for everyone, news and analyses
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Checking various time frames is excellent for trading, but don't fool yourself with the importance of some "magical" ratios: 4:1, 6:1, 2.73:1, it doesn't matter. It just tricks you to over-optimize things that don't matter. Use simple rules. When using intraday bars like 30 minutes use daily as a higher frame (for daily bars, use weekly or monthly), or if you have 5 minutes or less, use something like 4 hours. It is better to use longer frames with shorter, something where much more information is covered. But you can have a strategy with any time frames 5-30 minutes, 1-10, or anything; just don't over-optimize.
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The timeframe you choose depends on the type of technical analyst style. If a TA is a small timeframe trader like M15 for a short term trading opportunity otherwise known as scalping then it is advised to go to atleast two upper higher time frames (H1) for analysis.Analyze on higher time frame, and shift two time frames lower for entry opportunity, this is not a constant trade plan for most technical analyst, refinement has hit this narrative severally depends on how best it works for different technical analyst.
Like Like Celebrate Support Love Insightful Funny 4 - Amit Kumar Shukla Experienced Investor and Technical Analyst | CMT Level 2 Candidate | Financial Markets Professional | Trainer
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Choosing multiple time frames to confirm chart patterns requires a strategic approach. Start with a primary time frame, often daily/weekly, to identify core pattern. Then choose shorter intervals, e.g. Hourly / 15-min charts to determine accurate entry/exit points. Additionally, incorporate a longer time frame, such as a monthly chart, to assess the overall trend. Maintain consistency across these time periods by aligning patterns & indicators. The hierarchy of time frames is crucial; Prioritize higher ones for trend confirmation. Tailor the selection to your trading style & focus on time frames that suit your strategy & risk tolerance. Remember that the goal is to strengthen your pattern analysis & increase confidence in trading decisions.
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At first, on higher time frame, I look for the direction of the trend. Then I watch two time frames lower to find a position in direction of my higher time frame. Price action is the key.
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3 How to confirm chart patterns with multiple time frames?
The basic principle of confirming chart patterns with multiple time frames is to look for consistency and alignment across the different time frames. This means that the chart patterns should be in sync with the trend and the momentum of the market, and that they should not contradict or conflict with each other. For example, if you spot a bullish reversal pattern on the lower time frame, such as a double bottom or a cup and handle, you should also look for signs of a bullish trend or a breakout on the higher time frame, such as a rising channel or a flag. Conversely, if you spot a bearish continuation pattern on the lower time frame, such as a descending triangle or a head and shoulders, you should also look for signs of a bearish trend or a breakdown on the higher time frame, such as a falling channel or a wedge.
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- Amit Kumar Shukla Experienced Investor and Technical Analyst | CMT Level 2 Candidate | Financial Markets Professional | Trainer
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Confirming multi-time frame chart patterns requires careful analysis. Start with a higher time frame (e.g. daily or weekly) to identify the primary pattern and prevailing trend. Then move to shorter time frames (e.g. hourly or 15 minutes) to get more precise entry or exit signals. Maintain harmony across these time periods, with patterns, indicators and volume confirming each other. Look for key support and resistance levels as these should line up with the pattern. Recognize the hierarchy of time frames and give longer ones more weight. Tailor your approach to your trading style while keeping risk management in mind. This method increases pattern reliability and strengthens trading decisions.
Like Like Celebrate Support Love Insightful Funny 1 - Vishnu D R Top Technical Analysis Voice | Options Trader | Investment Banking Consultant
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Bullish monthly chart, bullish weekly candle formation and then awaiting for a bullish daily candle is one of the best setups for entering a low risk - high reward trade. Viceversa works for bearish trades as well.
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On a daily time frame, market is found to be at a supply zone with obvious rejection and candlestick print of bearish engulfing which signals a sell. And checking a H12 and H6 it is appears to be breaking out of the previous low (support) in bodily closure, and on H4 it is showing three black crows (3 candlesticks formation pattern). This is a sell signal that aligns across time frames, execute such with take profit an stop loss.
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4 What are some tips and pitfalls to avoid?
Confirming chart patterns with multiple time frames can enhance your technical analysis, but it can also pose some challenges and risks. To get the most out of this strategy, it’s important to use a top-down approach, starting with the highest time frame that suits your trading style and objectives and then drilling down to the lower time frames to confirm and refine your analysis. Additionally, using complementary indicators and tools such as moving averages, trend lines, volume, and oscillators can help support and validate chart patterns. It’s also important to avoid overanalyzing or overtrading; focus on the time frames and chart patterns that are most relevant and reliable for your trading plan and risk management. Finally, don’t ignore or dismiss the higher time frame; signals and patterns that occur on the higher time frame often override or invalidate those on the lower time frame.
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- Yemmie Olaleye (CMSA®, FTIP™) ✪ I help individuals make informed & strategic decisions in the financial market; charts into profitable opportunities.Market Analyst| Coach| Mentor| Thought leader| FuturistCFI: FMVA®| CMSA®| CBCA™| BIDA®| FTIP™| FPWM
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Pit falls can occur when a technical analyst do not understand the time frame to analyze and take entry.If i see a three black crows candle pattern on daily time frame, i will not take the sell the following day because there is a threshold potential level of retracement which may make the second and third day a bullish move and ultimately sell massively thereafter, which means technical analyst can fall for this trap. Avoid such impulsive reaction in the market.Ensure you see clearly what the outlook is all about on higher time frame before coming to lower time frame to execute. A double bottoms (W) formation on M5 is a buy and on daily, it could be a supply zone on higher time frame, which means it is a mere retracement on LTF.
Like Like Celebrate Support Love Insightful Funny 3 - Vishnu D R Top Technical Analysis Voice | Options Trader | Investment Banking Consultant
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Most of the candlestick patterns on internet are single candle patterns. Often traders fall into a pitfall without understanding a key nuance that these patterns always requires a confirmation to enter into a safer trade.Eg: Hammer in downtrend. Traders assume, that in bearish trend, bulls defeated bears and ultimately managed to close near to the day's high and would be ready to take on bullish trades. It's a BIG MISTAKE. A trader needs to allow the price to at least sustain above the hammer's high and preferably close above it and then take a bullish trade.Conversely, an inverted hammer has similar rules to be followed in uptrend reversal.Similar confirmation required patterns are Harami, Engulfing, Long legged dojis etc.
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5 How to practice and improve your skills?
The best way to practice and improve your skills in confirming chart patterns with multiple time frames is to apply them to real or simulated markets. You can use historical data, backtesting, or paper trading to test your analysis and strategies on different time frames and chart patterns. You can also use online resources, such as books, blogs, videos, or courses, to learn from experts and examples. The more you practice and learn, the more you will develop your intuition and judgment in using multiple time frames to confirm chart patterns.
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- Yemmie Olaleye (CMSA®, FTIP™) ✪ I help individuals make informed & strategic decisions in the financial market; charts into profitable opportunities.Market Analyst| Coach| Mentor| Thought leader| FuturistCFI: FMVA®| CMSA®| CBCA™| BIDA®| FTIP™| FPWM
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Constantly remain active on chart and back test, spot live opportunity, experiment this on demo. Execute and wait for market reaction.Do not assume the formation of a candle is known before its completion. Just because of a market aggressive move to the upside doesn't mean the candle will end up as a bullish marubozu.., it can turn out to be a shooting star. Wait for the complete formation and confirmation of patterns before executing trades.
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Simple process to improve trading skills:1. Hypothesize a trading strategy2. Backtest using historical data3. Consider the strategy if the results are at least 75% favourable else discard4. Finetune the hypothesis5. Forward test in using paper trade6. Trade on small quanities7. Increase the capital deployment gradually8. Record the trades over a period and retrospect
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6 Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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- Vishnu D R Top Technical Analysis Voice | Options Trader | Investment Banking Consultant
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More analysis can lead to analysis paralysis!Successful trading does not require numerous indicators or factors or news, it just needs a specific well tested combination of just a few factors like 3 or 4.After years of trading and gaining experience, my favourite combination is Option Chain, NSE Participant wise Open Interest Data, Simple Candlestick charts and moving averages.
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Both retail and institutional traders frequently rely on chart patterns, with many aiming to initiate trades even before the pattern fully emerges. Consider using other indicators as confirmation.
Like Like Celebrate Support Love Insightful Funny - Javad Aliakbarisomeeh Trading Automation Forex , Crypto , Stocks | Co-founder ATS Startup | PhD. Management | MBA marketing | Software Engineer
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First of all if are not professional, DON,T change your time frame to persuade yourself that you meant sth else by your order and you should be changing your SL or adding or anything else and stick to your analysismulti timeframe alignment mostly leads to break out trading system while conflict of multiple time frame is used by reversal tradersMulti timeframe has various uses from getting triggers to setting SL or TP more specifically and so
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