Importance Of Higher Timeframe Confirmation In Forex Trading
Many traders only trade on one timeframe. Trading on a single timeframe does not give you the actual picture of the market. You need to learn the art of confirming the trend on the lower timeframe with that on the higher timeframes. This is just like zooming in and out of a picture.
Suppose, you find the trend on the intraday chart and the trend on the daily chart in the same direction, it is like having the wind at your back. If you can master the art of identifying currency pairs that have the intraday trends in the same direction as the daily and the weekly trends, you can reap immense rewards.
As a general rule, if you are trading the daily charts confirm the trend on the weekly charts too. Likewise, confirm the trend on the hourly chart with that on the 4 hourly chart. In the same manner, confirm the trend on the 15 minutes chart with that on the 60 minutes chart.
First open the intermediate timeframe and if you spot a trade setup, look for confirmation on the higher timeframe. The longer timeframe chart should also be showing a potential trend reversal if you spot a trend reversal on the intermediate term timeframe.
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.
However, the disadvantage to this multiple timeframe strategy is that a trend reversal or counter trend move appears on the lower timeframe first and then on the higher timeframe.
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Get these Forex Scalping Cheatsheets plus the 10X Scalping System FREE. Download this award winning Forex Trading System that made 1,306.50% in one month FREE and watch the banned system video.
by: Ahmad Hassam
Total views: 24
Word Count: 357
Date: Thu, 24 Feb 2011
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