Multiple Timeframe Analysis for Intraday Trading
In this article, I will discuss Multiple TimeFrame Analysis for Intraday Trading in detail. Please read our previous article, where we discussed the Intraday Trading Course. As part of this article, we will discuss the following pointers in detail.
- What is multiple timeframe analysis?
- Understanding the trend with multiple timeframe analysis
- How to use multiple time frames in trading
- Advantages of multiple timeframe analysis
Multiple timeframe analysis for intraday trading
Have you ever taken a picture-perfect setup on your primary timeframe chart only to see if it does not work and stop you? Traders should always understand the overall market environment, not just a one-time frame.
The advantages of using multiple time frames that we cover include:
- Allowing the trader to get a micro view of larger time frames can, in turn, conﬁrm the trader’s original trade analysis. It is like using a backup pattern and ﬁne-tuning an entry. An example would be having a pattern on a 60-minute chart and using a 5-minute chart to conﬁrm the entry.
- Risk can be managed more effectively by combining time frames. A trader can learn to move stops on smaller time frames for patterns that complete on larger ones.
- Using multiple time frames from larger to smaller can help the trader be aware of contrary or opposing patterns that form on smaller time frames against the longer-term time frame.
Let’s take the day trading example.
We will use 3-time frames for our decision-making
- Higher Time Frame (HTF) DAILY
- Intermediate Time Frame(ITF) HOURLY
- Trading Time Frame(TTF) 5MINUTES
Higher Time Frame (HTF) DAILY
The daily time frame for market overview and stock selection
FOR STOCK selection based on
- HTF support and resistance Or SUPPLY AND DEMAND ZONE
- HTF trend channel(demand and supply line)
- HTF SENTIMENT
- HTF SOS AND HTS SOW
Let’s analyze the chart
We have taken three stock-based on the above three stock selection method
Intermediate Time Frame (ITF) HOURLY
We will define the structural framework within which our trading timeframe (TTF)price action will move in this time frame. In this time frame, we will
- Indemnifying trend and
- Marking the nearest supply and demand zone
Let’s analyze the above three charts in the intermediate time frame above three charts.
Trading Time Frame (TTF) 5 MINUTES
We will use a trading time frame(TTF) FOR
- Used for zone selection
- Used for entry, exit, and stop-loss placement
How to select a zone?
Marking the nearest supply and demand zone
Find where we are with respect to the zone.
- If the trend is up and we are in the supply zone and avoid a long trend, we become sellers as the price at the supply zone or wait for a clear breakout from the supply zone.
- If the trend is up, we are in the demand zone and looking for opportunities for the long
- If we are in the middle of the trend, we can go with the intermediate trend
Let’s go to the trading time frame
Axis Bank Case Study
Sun Pharma Case Study
HDFC Bank Case Study
Multiple Timeframe Analysis for Intraday Trading Summary:
Multiple Timeframe Analysis (MTA) is a trading strategy where traders analyze the same asset under different timeframes to spot trends, confirm signals, and time their entries and exits more effectively. This typically involves looking at longer-term charts to identify the general trend or range for intraday trading and then drilling down to shorter timeframes for trade execution. Here’s how you might apply MTA for intraday trading:
Long-Term Trend Analysis:
- Start with a higher timeframe chart, such as the daily (1D) chart, to understand the broader market trend and key support and resistance levels. This sets the context for your intraday trading.
- Identify the overall trend direction: Is it uptrend, downtrend, or sideways?
- Next, move to a medium-term timeframe, such as a 1-hour (1H) or 4-hour (4H) chart, to refine your analysis.
- Look for patterns or levels where the price has shown a significant reaction in the past, such as bounce-backs or breakouts.
Short-Term Entry and Exit Points:
- Finally, switch to a short-term timeframe, such as the 5-minute (5M) or 15-minute (15M) chart, to determine specific entry and exit points.
- This is where you will look for specific signals or price action patterns that align with your findings from the higher timeframes.
Bringing It All Together:
- Make sure the signals from all timeframes are coherent. For example, if the daily chart is showing an uptrend, the 1-hour chart is showing a pullback, and the 5-minute chart is showing a reversal pattern, you might consider a long entry.
- Adjust your trade size and stop-loss according to the volatility observed in the different timeframes.
- Use the information from higher timeframes to set broader stop losses and avoid being stopped out by the ‘noise’ or normal fluctuations seen in shorter timeframes.
- Higher timeframe resistance and support levels can be targets for closing positions.
Examples of MTA for Intraday Trading:
- Trend Trading: If the daily chart shows an uptrend, use the 15-minute chart to enter long trades when the price dips to short-term support levels.
- Range Trading: If the daily chart indicates a range-bound market, use the 5-minute chart to buy near the range’s support and sell near the range’s resistance.
- Breakout Trading: If the 1-hour chart indicates a consolidation pattern, use the 5-minute chart to spot the breakout and enter in the direction of the break.
Adjustments During the Day:
- Monitor the higher timeframe charts throughout the trading day to check for any changes in the overall market structure that may affect your intraday positions.
- Be prepared to adjust or close positions if the longer-term charts suggest a change in the trend or range.
Multiple Timeframe Analysis helps intraday traders to align their short-term trading strategy with the longer-term market trend, increasing the probability of success. However, it’s crucial to maintain flexibility, as market conditions can change rapidly. Effective risk management and the discipline to follow a pre-defined trading plan are essential to successful intraday trading using MTA.
In the next article, I am going to discuss VWAP Trading. In this article, I explain the Multiple Time Frame Analysis for Intraday Trading in detail. I hope you enjoy this article. Please join my Telegram Channel, YouTube Channel, and Facebook Group to learn more and clear your doubts.
About the Author: Pranaya Rout
Pranaya Rout has published more than 3,000 articles in his 11-year career. Pranaya Rout has very good experience with Microsoft Technologies, Including C#, VB, ASP.NET MVC, ASP.NET Web API, EF, EF Core, ADO.NET, LINQ, SQL Server, MYSQL, Oracle, ASP.NET Core, Cloud Computing, Microservices, Design Patterns and still learning new technologies.