Why do we have to Trade Utilizing Several Timeframes?
To improve the efficiency of our trading strategy. We see the main Trend utilizing a higher time frame than what we intend to use & a lower Time frame to enter a trade.
Say we desire to trade making use of the Daily Charts. We take the Weekly charts to see the main trend. Suppose it is an uptrend inside a Weekly chart. We will tend to trade only long positions. We will use entries in the daily charts to enter long positions only. When sell signals are produced we will just exit our long positions. I.e. we don’t short sell.
Suppose it is a downtrend in the Weekly chart. We will tend to trade only short positions. We will use a entries inside the daily charts to enter short positions only. When buy signals are generated we will just exit our short positions. I.e. we don’t enter long positions.
Now that we are utilizing two timeframes. Now coming to timing the entry of trades or adding additional positions. (Pyramiding) We can further use a Hourly chart to time our entries. Supposethe weekly & daily charts are inside a uptrend. We will enter a long position or an additional long position when a hourly chart gives us a buy signal. Supposethe weekly & daily charts are in a downtrend. We will enter a short position or an additional short position when a hourly chart gives us a market signal. This timeframe would not be used to exit the trades. It is solely to enhance the timing for entry. For exits we would use the signals generated inside the daily charts.
Using numerous time frames to trade
We take three charts from the very same security. First is the weekly chart. Next chart is the daily chart. Third chart could be the hourly chart.
We will now use the daily chart to trade. We check the weekly chart for the weekly trend. Lest assume the weekly trend is up. So centered on this info we will just trade long positions inside the daily chart.
We look for a purchase opportunity within the daily chart or we can see the hourly chart to enter a long position.
Now for entering additional positions we use acquire opportunities within the hourly chart. We would exit based on the daily chart only, because we were buying and selling centered around the daily chart.
Similarly we can trade short where weekly charts are inside a downtrend and daily chart generates market opportunity. Additional positions are entered whenever promote opportunities are produced on the hourly charts.
For Day trading we can use the Hourly, 15 Min and 5 Min charts here we trade the 15 Minchart. Or we can use 15 Min, 5 Mins and 3 Mins charts here we trade the 5 Mins chart.
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