Learn Trading Online: Multi Time Frame Analysis

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Multi time frame analysis is a very important aspect of technical analysis. When indicators show the same trend direction over multiple time frames, it generally suggests a higher probability of trend continuation.

In the field of time frame analysis, some argue that larger time frames will dominate smaller ones, while others say that smaller time frames harmonize, and will overcome larger time frames.

We think that this is a rich field for exploration, but the only conclusion that we have made is that alignment between time frames tend to enhance a signal’s potential. And this is a more important conclusion, then the former debate.

Let’s look at the S&P chart as of today. We begin with the daily timeframe chart:

Clearly the S&P is bullish, with a great setup looking to resume. The kumo is thickening and sloping up, Tenkan Sen is above Kijun Sen, Chikou Span is in clear skies, and prices are clear of any Kumo shadows. While the daily chart is bullish, a trader should find out how the longer time frames are doing. Perhaps there is an oncoming train/trend that we are walking into? We want to make sure the larger time frames paint a similar story. Let’s look at the S&P weekly chart as of today:

Well, it looks like a bullish set up as well. Senkou Span A is above Senkou Span B, prices have a clean kumo break, and Chikou Span is in clear skies too. There is therefore multi time frame alignment when we compare the daily and weekly charts, increasing the trader’s bullish conviction.

Assume the daily chart is bullish, but the weekly chart is only in a bear trend retracement, we will be very wary of a bear trend resumption and may not want to hold on to a bullish daily trade for long. Some traders may wish to wait for multi time frame alignment for a higher probability trade.

What can we expect in the coming weeks?

With that in mind, the weekly chart also warns of a retracement soon, since price has deviated very far from the Kijun Sen. Price is also running into resistance at 1370. Consolidation is expected.