December 3rd 2007
Merge Time Frames to Make More Money
One method introduced to me that I find useful is syncing time frames to support my trades. In the past, I found myself looking at trades in a vacuum. If I was trading a pattern forming in the daily charts, I would only look at the daily charts, but just focusing on one time frame leaves out a lot of information.
I think most traders are familiar with looking at a larger time frame when looking at a pattern. When I look at a pattern in the daily charts, I like to zoom out and look at the weekly and monthly. The reasons are support and resistance on larger timeframes can prove to be very strong. This longer term support and resistance can influence how your trade plays out.
But what about looking at smaller time frames to support a larger time frame? Why do this? Well, again we have support and resistance to consider. But the real power from smaller time frames is that they allow you to leverage your smaller time frame gains to pay for your larger time frame risk.
When I see a pattern forming on a daily chart, I look at the smaller time frames 60, 30, 15, and 5 to identify a pattern to trade when the larger pattern sets up. For example, If I am trading a triangle on the daily chart, and as the triangle comes close to my setup, I drill down to smaller time frames to find an intra day setup. In this case I was looking at a trade in GSOL, the stock gapped above my entry, but I took the triangle that formed on the 5.
This allowed me to get into the trade that was supported by the daily time frame and paid for by the 5 minute time frame. Frequently, I’ll make quite a bit more intra day than my risk on the larger time frame trade, but I try to bail when my larger time frame risk is covered.
I don’t consider myself to be a day trader. I much prefer the ability to sit back and analyze the market using a swing and position trading methodology, but using an intra day time frames to pay for my daily setups has worked out very well.
If you like this post, then consider subscribing to my full feed RSS feed. You can also Subscribe to A Trade A Day by Email and have new posts sent directly to your inbox.
9 Comments »
Suzanne of Pittsburgh Options Trader on 03 Dec 2007 at 3:27 pm #
Do you have a platform that allows you to see multipple time periods at the same time? I find it distractign to switch back & forth between more than one time frame. My favorites are the 6 mo daily with my indicators on them, and then the daily 5 minute for entering a trade
thewild1 on 03 Dec 2007 at 3:46 pm #
That is an interesting look. I usually start from from 5 days, go out to 6 months, and then check it out at 3 months. It is always interesting to see how bad or good a company can look at different time frames.
Bubs on 03 Dec 2007 at 5:03 pm #
My whole trading style is based on merging two time frames. I look on the daily chart for a breakout number and then find the entry point using a intraday chart. Here some more info on merging time frames: http://traderbubs.com/trading-plan/
Jonathan on 03 Dec 2007 at 7:09 pm #
@Suzanne Yes, I use esignal and I can have mutiple charts with multiple time frames.
@thewild1 Agreed, getting them in sync though is very powerful.
@Bubs Thanks for sharing, That is exactly what I’m talking about.
Weekend Links by TraderBubs.com on 09 Dec 2007 at 10:07 am #
[...] My trading style is based on merging time frames. [...]
66th Festival of Stocks | A Trade A Day on 10 Dec 2007 at 12:02 am #
[...] presents Merge Time Frames to Make More Money posted at A Trade A Day, saying, “Put the odds in your favor by finding trades that are in [...]
Trading 1-2-3's | A Trade A Day on 17 Dec 2007 at 12:05 am #
[...] The merging of time frames supports the intraday trade. I rarely trade intraday without some kind of reason on the daily [...]
Jon on 19 Mar 2008 at 1:16 pm #
Nice tips. Thanks.
Venkat on 27 Dec 2008 at 3:54 am #
Technical indicators also do this performance or MTF only for price movement.