Tag: Multiple Timeframes

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Forex Course

171. The Best Timeframe for Forex Markets

Introduction

Introduction

Introduction

In our previous lesson, we looked at which timeframes you should trade in the forex market. We established that the timeframes you trade depend on the type of forex trader that you are. This lesson will cover the best timeframes to trade using illustrations depending on the type of forex trader you are.

Best Timeframe for Forex Position Trading

1-Month EUR/USD Primary Trend Timeframe

The monthly timeframe shows a downtrend in the pair.

1-Week EUR/USD Trigger Timeframe

For a forex position trader, the 1-week timeframe can be used to establish the support level. This level will make the best entry point when the price trends below it.

Best Timeframe for Forex Swing Trading

Daily EUR/USD Primary Trend Timeframe

Forex swing traders trade in the direction of the preceding trend, which in this example, is a downtrend.

4-hour EUR/USD Trigger Timeframe

For a forex swing trader, using the 4-hour timeframe is the best to identify the ideal entry and exit points.

Best Timeframe for Forex Day Trading

1-hour GBP/USD Primary Trend Timeframe

For a forex day trader, the dominant market trend is a downtrend. With this chart, the day trader can establish multiple support and resistance levels. The 15-minute timeframe is used to establish the best market entry positions.

15-minute GBP/USD Trigger Timeframe

With the 15-minute timeframe, multiple entries and exit points can be established.

Best Timeframe for Forex Scalping

15-minute EUR/USD Primary Trend Timeframe

For a forex scalper, the 15-minute timeframe shows an uptrend. The 5-minute timeframe will be used to establish the best points of entry into the market.

5-minute Trigger Timeframe

The 5-minute timeframe presents the forex scalper with the best points for entry into the uptrend market.

Best Timeframe for Fundamental Forex Traders

Fundamental forex traders can also use timeframe analysis to establish the magnitude and volatility resulting from the release of an economic indicator. Therefore, depending on whether the indicator is high- or low-impact, you can determine which timeframe is best to trade.

With high-impact indicators, you can trade from the 30-minute timeframe.

30-minute timeframe for Australia’s GDP data release. September 2, 2020, 1.30 AM GMT

Furthermore, the price action from the release of a high-impact economic indicator can persist in the market for the long-term.

30-minute timeframe for Australia’s GDP data release. September 2, 2020, 1.30 AM GMT

The 4-hour chart shows that the AUD/USD pair continued trending downwards due to the less than expected GDP growth data.

For low- to medium-impact economic indicators, it is best to trade shorter timeframes from 1-minute to 15-minutes.

5-minute timeframe for Australia’s retail sales data release. August 21, 2020, 1.30 AM GMT

At longer timeframes, the effects of these indicators on the price action dissipates.

1-hour timeframe for Australia’s retail sales data release. August 21, 2020, 1.30 AM GMT

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Categories
Forex Course

170. Why Consider Analysing Multiple Timeframes When Trading Forex?

Introduction 

Introduction 

Introduction 

Our previous lessons have covered trading multiple timeframes in forex and which timeframes are suitable for your trading style. To some forex traders, trading multiple forex timeframes can seem tedious and time-consuming. Here are some of the most important reasons why you should look at multiple timeframes when trading forex.

1. To easily identify trends and their momentum

Depending on the type of forex trader you are, multiple timeframes will enable you to see the prevailing market trends at a glance by filtering out periodic price spikes. It is easier to identify the direction of the market trends and consolidations, whether in the short- or long-term.

For the long-term market trend, you can use the weekly and the monthly timeframes, while the intermediate market trend can best be identified by the 4-hour to daily timeframes. Timeframes of between five minutes and one hour can be used to determine the short-term market position.

The longer timeframes filter out the short-term price fluctuations, which might otherwise result in trend inconsistencies when viewed alone. The periodic fluctuations in the short-term add up in the long-term. With multiple timeframe analysis, the strength and consistency of the short-term trend can be compared to that in the long-term. This comparison is made by observing whether the prevailing long-term trend was dominant in the short-term as well.

2. To establish the significance of fundamental indicators

Using multiple trend analysis, you can easily establish the magnitude that news release of economic indicators has on a given currency pair. To determine the significance of the economic indicators, you can use different timeframes to establish how long the news release affected price action. The effects of high-impact fundamental indicators can be traced from the shorter timeframe to the longer timeframes. Low-impact indicators only affect price action on the shorter timeframe.

3. Identifying the support and resistance levels

Based on the forex trading style you choose, you can use the more extended timeframe within your category to establish the support and resistance levels in the market trend. Shorter timeframes can then be used to trigger entry and exit points for a trade.

These support and resistance levels are crucial in deciding the forex order type you want to execute. Say, for example, you want to use a buy limit order. You will use the support level as your trigger price. Similarly, the support level can be used as the trigger price for a sell stop order. You can use the resistance level as the trigger price for the sell limit and buy stop orders.

4. To avoid the lagging effects of technical indicators

Technical forex indicators are lagging since they derive their properties from the price action of a forex pair. Therefore, the forecasting significance of multiple timeframe analysis in the forex market can be said to be leading that of the technical indicators. Furthermore, some technical forex indicators can produce conflicting signals. Thus, trading with multiple timeframes improves your forex analysis.

We hope you understood why it is crucial to consider analyzing various timeframes while analyzing the Forex market. Please take the below quiz to know if you got the concepts correctly. Cheers!

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Categories
Forex Course

168. Learning To Trade Multiple Timeframes In The Forex Market

Introduction 

Introduction 

Introduction 

In our previous lesson, we discussed multiple timeframe analysis in forex means. Now, let’s find out what forex trading with multiple timeframes means. In case you are wondering, trading multiple timeframes in forex does not mean that a trader is opening several positions using different timeframes. We are not saying you can’t do this, you if you have the money; but that is not what trading with multiple timeframes in forex means.

Trading multiple timeframes in Forex means using different timeframes to establish the trend and support and resistance levels of a currency pair to determine the best point of entry and exit of a trade. Let’s use a few examples to show how trading with multiple timeframes in forex occurs.

As we had mentioned in our previous lesson, the timeframes you use for your analysis depends on which type of forex trader you are. The best way of trading multiple timeframes in the forex market is by using the top-down technique. With this approach, you first observe the longer timeframes for the general market trend, then use the smaller timeframes to establish more current trends.

Let’s take the example of a forex day trader. You will start by using the 1-hour timeframe to establish the primary market trend. Say, a day trader wants to open a position on September 9, 2020, at 11.00 AM GMT, using the 4-hour timeframe, the market shows an uptrend.

4-hour timeframe for EUR/USD

1-hour timeframe for EUR/USD

The 1-hour timeframe confirms that the pair’s intermediate trend is consistent with the uptrend observed in the 4-hour timeframe.

15-minute timeframe for EUR/USD

The 15-minute timeframe can then be used to select the best entry point.

Determining the market limits: the longer timeframes will enable you to determine the support and resistance levels of a currency pair. The resistance levels help you set your exit points while the support levels will help you timing your market entry.

Establish the trend momentum: While the larger timeframe gives you the overall market trend, the smaller timeframes will help you establish the spikes in the price of the currency pair. These spikes will help you to establish the short-term strength of the trend compared to the longer-term trend.

Helps avoid the lagging effect of some technical forex indicators: Most technical Forex indicators are lagging, meaning trend changes signaled by the indicators lags the real change in the price of the currency pair. Therefore, price-action can be said to be leading the technical indicators in the forex market.

We will cover these three reasons in detail in our subsequent lessons.

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