You need to learn the art of trading multiple timeframes. It is like zooming in and out of a picture in order to see what is clearly happening to the market. If you find a trend on the lower timeframe confirm that on a higher timeframe. Many traders make the mistake of trading on only one timeframe. This only makes them waste their time and energy and make losing trades.
Let’s make it clear. Suppose, you find a trend on an intraday chart like the 60 minutes. You should confirm that the trend on the daily chart is also on the same direction. Trends on the 60 minutes chart and the daily chart is like having the wind at your back.
Keep this rule of thumb in your mind when trading. Confirm the trend on the 15 minutes chart on the hourly chart. Both should be in the same direction before you enter into a trade. Likewise, confirm the trend on the hourly chart with the 4 hourly chart. Both must be in the same direction and in the same manner, the trend on both the daily chart and the weekly charts should be in the same direction if you are trading the daily chart.
So, as a rule of thumb, first look for a trade setup on the intermediate term timeframe. If you find a potential trend reversal in the making, look for confirmation on the longer timeframe. The longer term timeframe should also be showing signs of a potential trend reversal like a stochastic cross or a doji. Now, shift to a shorter timeframe for a signal in the same direction.
When trading, use the following length of time on the different charts in order to make correct trading decisions:
Monthly Charts: 7 years,
Weekly Charts: 2.5 years,
Daily Charts: 8 months,
4 Hour Charts: 1.5 months,
1 Hour Charts: 10 days,
15 Minutes Charts: 28 hours,
5 Minute Charts: 8 hours.
Coordinating Timeframes means seeing trade setups on the higher timeframe and then waiting for the trading signal in the same direction on the lower timeframe. So, once the signal comes on the lower timeframe, you should again check the higher timeframe to confirm that that initial indications that warranted the trading signal are still in place.
Downside to this higher timeframe trend confirmation occurs in a counter trending market, a sideways market or a trend reversal. If you use the higher timeframes to confirm a reversal, you will miss it, as it happens on the lower timeframes first. That is why it is very important for you to understand the difference between trend trading and counter trend trading. Try these Forex Signals by two top gun traders in a friendly competition. Learn this powerful Fibonacci Retracement method FREE that pulls 500+ pips per trade.